Quarter-End Rally Arrives A Day Late

The quarter-end rally arrived a day late, spurred on by improving manufacturing PMIs. Poor job data from the US failed to burst the bubble as markets await the ISM number.

Today’s been deadly quiet on the trading front; I warned a few days ago that stockmarkets have a seasonal bias to pushing higher at the beginning of July and although (for me) yesterday’s price action didn’t run to form I’m happy to watch shares push higher today. I certainly don’t feel bullish enough to be long, but I’m keeping my trigger finger away from the sell ticket just now.

The world might have changed by the time I finish this, but at the moment here’s what I’m watching:
-FTSE battle to regain the 4300 level. In yesterday’s blog (GDP Shocker Spoils Sterling’s Party) I highlighted the growing street cred’ of this level as a major line of support & resistance. For most of the morning FTSE looked to be settling above the line, but lunchtime’s ADP shocker pushed it back below. A close back above 4300 might just make me a bit twitchy about rushing to short the index.

-the next big level for FTSE is the 21-day moving average at around 4332 (resistance at this level could be stronger because it also coincides with the 50-day MAV). For me the 21-day MAV sloping downwards adds to the bear case, but it’s still fairly new (12 days) so I’m not putting my body on the line if a load of July bulls come running at me.

-The US ISM number will be a bigger test, but I found it interesting that, unlike yesterday, stockmarkets weren’t fazed by poor data out of the US. The ADP employment number was 80,000 worse than forecast; this caused an instant mark down,but there was no follow through and shares regained their poise.

-Across the channel the Dax is still struggling to take its 50-day moving average at 4871. Check out the chart; this has been a major obstacle for over a week now. And, like running the gauntlet in Gladiators, if it breaks that level it will have to face off the descending 21-day MAV at 4907.
Since starting this blog I’ve gone long of GBPUSD, not with any great conviction after yesterday’ fall but it does look like a ‘weak Dollar’ sort of afternoon. I paid $1.6484 and have since part-closed at $1.6514 for +30 pips. At the moment I’m still long with my stop loss at $1.6494 to lock in 10 pips of profit.

I do think this is a week to be careful; not only is it very hot outside, but we’ve an illiquid market ahead of the long US weekend and major economic data in the form of the US payrolls to contend with. It might be the time to grab a coffee and mull over my latest piece Exploding The UK Employment Myth.

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