Better News For The Manufacturing Sector Boosts Stocks

Equities regained some of last night’s losses but failed to push on after more re-assuring data from the manufacturing sector both in the US and UK.

There’s not a whole lot to say about today so far, except that those pesky equity bulls won’t lie down. Last night it looked as though the month-end squeeze was subsiding with the US ending the day in negative territory. I jumped on the bandwagon, selling FTSE (^FTSE) at 4241, but the bears lost interest below 4200 and I closed out at 4207. Today’s attempt to push higher is predictable given that the 4200 level pretty much held. I’m sure the bulls will see the fall as merely getting rid of some froth before another push higher.

But not so fast my bovine friends; check out yesterday’s shooting star on the chart above. A shooting star candle, following a new high in an uptrend is (usually) a good reversal sign. But it looks like no-one’s bothered to read the script today.

At the moment I’m watching the US fall despite better than expected data. However, the UK market seems frozen above 4200; I wonder if this is still a sign that traders are nervous about being out of the market, rather than (as before) being nervous about holding shares.

Me? I wouldn’t feel comfortable buying here; I’m better at letting the charts help me in forex land, but with equities my underlying view gets in the way.

Ah, talking of currencies, here’s a trade that I’m sure will get a few heads nodding in a ‘been there, ripped up the T-shirt’ sort of way. I’ve been getting more bullish on Sterling; unlike my equity trading this is based on the chart patterns rather than fundamentals. I quite fancied a long bet on GBPUSD this morning, but there was a catch.

With Europe taking the day off, I reckoned the markets would be illiquid and slightly random in nature. I was also due for a decent gym session. In the end I plumped for a £1 long bet at $1.4821 with a stop loss at $1.4768, 20-pips below the 21-period moving average on the 5-minute chart, allowing plenty of wriggle room for my trade to work.

My Tony Blair grin when I returned from the gym to see GBPUSD up at $1.49 was short-lived; there was no position showing. A quick check of the charts confirmed a low of the day at $1.4765, just enough to take out my stop at ‘68. This was at 9.05am, just before the 9.30 manufacturing PMI that sent Sterling skywards. Hey, that’s trading!

Make sure you catch the second part of Zebu’s look at what the economic indicators are telling us about the US.

Finally, don’t forget the mammoth encounter at Croke Park tomorrow, Munster verses Leinster in the Heineken Cup semi-final. This clash is even tastier as Munster have just won the Magner’s League, and guess who were last year’s winners?

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