300910 for Spreadex

8/8/2019 300910 for Spreadex

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SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573E-MAIL [email protected] WWW.SEVENDAYSAHEAD.COM This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sourcesbelieved to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness oraccuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold orheld on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein wereconsidered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,relationship or arrangement in relation to them.

in association with

Market Bulletin 30th September 2010

FTSE’s resilient hesitation encourages further optimism

The Technical Trader’s view:

Apr May Jun Jul Aug Sep Nov Dec 2008 Mar Apr May Jun J ul Aug Sep Nov Dec 2009 Mar Apr May Jun Jul Aug Sep Nov Dec 2010 Mar Apr May Jun Jul Aug Sep Nov De

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6300640065006600670068006900700071007200

38.2%

FTSE 100 Index LIFFE Continuous

WEEKLY CHART

The market has been driven up

from the lows by a completed

Head and Shoulders Reversal

pattern.

The minimum target move ( to

5644) was achieved - and then

the market fell back.

But only to find support at the38.2% retracement around 4900.

Look closer at the bounce from

that level.

But note too, the importance of

the current market level – it is a

potential additional Neckline of a

bull Head and Shoulders pattern.

If overcome (the neckline level is

5662) the market will receive alarge additional stimulus…

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22 29 6

April

12 19 26 3

May

10 17 24 31

June

7 14 21 28 5

July

12 19 26 2 9

August

16 23 30 6 13

September

20 27 4

October

11

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61.8%

High 5720

5616.50

approximate level of the weekly cont. chart neck

5363.50 High

FTSE 100 Index Dec 10

DAILY CHART

The day chart is interesting.

Note the tight consolidation of

the past few weeks.

And the support from the rising

diagonal from Prior Highs.

Attempts by the bears to break

that diagonal support have –sofar- repeatedly failed.

It’s tempting to look for a

structure within the congestion

– but there isn’t one.

Yet, on balance, we favour a

test of the possible Neckline

and the Prior High at 5720.

We are short-term bulls. And if5720 can be taken out, another

medium-term bull leg is in

prospect.

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The Macro Trader’s view:

Impending spending cuts and VAT increases scheduled for the start of 2011 may at bestdepress growth for a couple of quarters and at worst risk a double dip recession. Despite this

the FTSE is only around 200 points off its 2010 highs.

Not a bad recovery from the lows hit in early July when the market gave up almost 1000 points

on a range of anxieties.

The main factors weighing on the market then were:

- The weakening US economic recovery, and- The Euro zone Sovereign debt crisis.

In truth, neither has been dealt with.

The US economy continues to show signs of weakening causing policy makers and

administration officials alike to lose sleep. They ponder how best to re-invigorate the economy.

As for the Euro zone debt crisis, all seemed calm during the summer. But now there arerenewed fears about Ireland as the Anglo Irish Bank is in need of rescue. The sum involved is

put at one year of Ireland’s tax revenue - an expensive bail out. But the cost of failure would be

much greater.

So why then are stocks looking so bullish and in particular the FTSE?

As ever, markets and economies are closely linked. In the US the Fed has let it be known that

it stands ready to buy Treasuries if the recovery weakens any further in QE2.

In the UK, the Bank of England’s recent MPC minutes have alluded to a similar course. Policy

makers are moving towards a position where they might need to re-activate their own QE

program as they now judge downside risks to growth greater than upside risks to inflation due

to the impending fiscal tightening.

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While one could easily take the view that the economies of the US and UK are in bad shape if

both Central Banks need to restart the printing presses, the equity markets take the news

positively, since a fresh injection of Central Bank reserves should help spur economic growth.

Moreover there is always the possibility that here in the UK the Bank might opt to skip buying

gilts and buy corporate bonds instead, in an effort to get the cash out to main street, thereby by

passing the Banks that politicians still accuse of hording cash.

In any event, it is the promise that the US and UK could reactivate their QE programs that is

largely behind the current bullishness of stocks including the FTSE.

Mark Sturdy

John Lewis

Seven Days Ahead

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300910 for Spreadex