Swine Flu Barely Raises A Sneeze From Stockmarkets

Whilst the media is intent on whipping the world into a frenzy over swine flu, the markets have been pretty sanguine. Traders bought the lower levels in equities and forex traders have spent most of the day in quarantine.

Not much to shout about today; I’ve taken profits on two of Friday’s trades and been stopped out just above break-even on another. I’ve taken a rest from trading forex today as there’re no clear cut trends on my favourite pairs.

Last Friday I used the squeeze in equities to increase my short position in FTSE (^FTSE); it was risky (possibly even foolhardy) as I was acting on instinct but in the face of a pretty convincing uptrend. It’s not big or clever and I usually advocate staying on friendly terms with the trend. But I do have a weakness when it comes to equities, especially when I feel that market lacks the hardened cynicism of bond traders.

So, on Friday I added short positions at 4109, which was way too low, and 4150, which seemed reasonable. When I returned from my Friday night rugby meeting I was pleased to see that my trades had worked. However I was less pleased when I found out that my screen had frozen earlier in the evening and that prices had closed considerably higher (in somewhat suspicious circumstances).

This morning’s weak start allowed me to close both trades at a reasonable profit, just below the 4100 level. They were never meant to be long-term bets, just active trading to make an honest crust. I’m still running a short from last week, but in a small adrenalin-free size.

Not long ago the fear of a pandemic would have caused the market panic the media so desperately wants. But really, apart from the odd airline and travel companies, the markets have barely sneezed. Instead it looks like traders gratefully accepted the early mark down as a way of getting into the market (or closing out their short bets!).

This morning the 100-day moving average acted as support; the next challenge facing the bulls is resistance at around the 4180 area.

On Friday I said that I was going to leave any gold and forex trades until after the weekend’s World Bank meeting. So it will come as no surprise that I bought a small bet in gold. The market looked hot to trot so I paid $908 for a £1 bet and was soon rewarded when the price pushed up to $911. This morning things looked even brighter with more traders picking up on the news of Chinese buying. This, and fears over the pig flu, saw gold up at $916.

I’m still not convinced of the short-term bull case so I brought my stop up to $909, where I was hit later in the day for the smallest of profits.

The recent rally has taken gold back above $900, which was a must for the bulls. However, there’s a bit of work to be done around the $920 area where there’s resistance from the downtrend line and the 50-day moving average.

This isn’t a week of hard-core economic data; the main event will probably be the release of Q1 US GDP on Wednesday. However, it is another week packed with company reports from both sides of the Atlantic (and English Channel). Check out the Weekly Wrap for details.

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