This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Uncertainty likely to dictate Monday markets
The weekend ahead could be busy with geopolitical commentary following Thursday’s tragedy, and this will conspire to leave uncertainty as the main driver once markets reopen on Monday.
However, the usual pre-weekend squaring of positions helped the FTSE to close a more reassuring distance away from 6700. Earnings come thick and fast both sides of the Atlantic in the coming week, and with a majority of S&P 500 reporters so far coming in ahead of estimates, markets will be able to recover some lost ground if the trend continues. Dip buyers were caught out this week, but the longer the FTSE 100 holds above 6700 the greater the pressure will be for some to get back into the market.
Dow retakes 17,000
The Dow Jones has proved yet again that if traders want to find resilience in this market then they must look to US indices. Earlier today it looked as if the S&P 500 would record its first two-week decline since January, but the better start potentially means that it might be yet another one-week drop for the bears before the rally resumes. S&P 2000? It still isn’t a difficult trick to achieve, so long as earnings keep coming in on the bright side.
It was a mixed bag for Google’s figures, but for now investors are happy to give the firm the benefit of the doubt. If the investment in research and development this quarter pays off, they will be happy to have foregone yet another increase in profit.
Gold prices retreat
The fact that the volatility index rose 30% in a single day ensured that gold prices caught a bid yesterday afternoon. Prices have now retreated from the $1324/oz, yet while above the $1300 level there is a propensity to move higher. The 50-day moving average, along with the previous trendline resistance from the October 2012 highs, is providing a base for gold and thus any daily close below $1292/oz could erase the current bounce.
In NYMEX, previous support lent by the six-month trendline is now turning into resistance, and the coincidence of the 50-day moving average at $103.80 could well act as a magnet for additional upside should this level be breached.
USD/JPY back in focus
Risk aversion has put USD/JPY back in focus, and it looks like another drop through ¥101 could be in the offing. Last time we said this the 200-DMA was still acting as support, but the situation has now changed and there is an awful lot of clear air underneath the price at present. Japanese data next week might help reverse the steady drift lower, but the weekend is likely to see a ramping up of international tensions as Europe and the US reassess their stance following the tragic events of the week.