Financial Spread Betting News

Capital Spreads Market Commentary

Late comment this morning due to weekend in the west country.

UK markets are once more looking buoyant with the FTSE up 20 points at 6256-6258 as oil and metals recovered their nerve in late Friday activity followed by continued buying this morning. The lack of any actively negative news over the weekend has also bolstered frayed traders nerves as doom laden Sunday's comment has tended to weigh on the mind.

Over the past couple of weeks the FTSE has had several attempts to break lower all of which have been swiftly rejected. The rising trendline support has been touched on four separate days but on each occasion the market has closed over 50 points away from this line. Traders will be wary of selling into such a solid positive indicator. On the other hand there is plenty of bad news around as well with respected indicators suggesting that the value of shares is actually more stretched than just before the fall out of 2001 (this though is a long term prognosis whereas the support line rejection is fresh in traders minds).

For once the UK index is leaving the Europeans in its wake as the Dax has only managed a small shift higher to 6752-6754 and the Dax/FTSE spread is once more below 500. The Dow which for much of Friday was looking like putting in a weak performance managed in the end to close almost unchanged and this morning is following in the wake of the FTSE and Dax and is trading up 10 at 12570-12574. The Dow is still very close to the high printed on both Wednesday and Thursday last week at 12610 and this will be the first target for bulls followed by technical resistance at 12675. On the support side we have 12540 to 12550 and 12475.

The S&P is having trouble getting through 1435, having failed here a few times last week and at 1444 in the March contract which proved to be the peak back in Mid December as well as last week. The current price in the daily is at 1431.7-1432.1 so the temptation for another attempt to the upside is still strong.

For UK equities Wolseley made an unexpected down beat statement on the effect of US housing starts on its numbers but countered this by re-emphasizing that the company expected to make progress for the year as a whole. Of course the devil is in the detail and the markets were initially unhappy with what was meant by 'progress'. The shares opened 22p lower on the off but wiser heads have decided that a board of Wolseley's quality is not one to be ignoring. We are now just 8p lower at 1335.3-1337.7 (which is actually higher than Thursdays close).

Poor old Pearson were unable to match the rather unreasonable billings of last week and although saying that they were in line to deliver at the top end of expectations this was not quite enough for the 8% rally of the last two weeks. The shares are 15p lower at 824.6-825.9.

Currency markets have followed up Friday's non event with another thin display this morning. FX trading volumes are well down over the past few weeks globally and only the Yen seems to be exerting any interest at the moment. The USD/Yen is at 121.60-121.62 this morning a new three year high and not far from the massive 121.95 resistance. Naturally the Euro is threatening an all time high (once more) at 157.52-157.55 and Sterling is at the massive resistance level of 240.00 at 239.97-124.05.

The worldwide hunt for return is forcing the interest bearing currencies ever higher with the Yen and Swiss Franc being the major losers.

Gold and Silver returned to the plus side last week with a nice move higher pressuring resistance levels. Silver at 12.93-12.96 is just below 13.00 which (aside from some curious price action on the first days trading in January) has proved difficult to break above and Gold is at 634.9-635.5 again looking to break towards the upper trading range of 636 to 645.

Oil on the first evidence of a little cold weather has managed a nice little bounce from 51.00 in the March Nymex to the current 53.70-53.76. Traders will be looking for a break above 54.00 as the first indication of a renewed move higher but will be wary that any stagnation around current levels will leave the market open to any further bad news.

The markets are looking a tad soft this morning in light trading. Our clients are sitting on their hands (probably the right thing to do in the circumstances) as the indices oscillate in a tight(ish) range almost on a daily basis.

The FTSE was looking quite perky yesterday morning but in an almost mirror image of Wednesdays trading activity the market having managed an over 50 point rally by early afternoon then proceeded to give it all back as the US markets reacted to the inflation numbers. The weakness in Oil did not help either as dealers were caught on the wrong foot by the heavy increase in inventories.

This morning sees the FTSE open some 20 points lower at 6190-6192 but as mentioned there appears to be a distinct lack of interest this morning. Light volumes normally mean a drifting market so we may get a slow slip away during the day.

The Dow hit the exact same (all time) high yesterday at 12610 as it had printed on the previous day but with no follow through buying traders decided that this was a selling opportunity. Whilst traders are understandably nervous of being short in such a sustained bull run (the Dow has rallied 2000 points since July without a single serious setback) there is room for a small pull back to around the 12440 level without worrying the major bull trend line. There is support at 12485, as well, being the resistance high from Mid December. On the up side the targets are 12585 then the highs at 12610 and the major resistance at 12640.

On the corporate side there is little to report with no major interims or trading statements.

The malaise seems to be drifting into the FX markets as well with the markets seemingly waiting for economic data before making any moves and then going bananas for half an hour before settling at the new level. Today we have the UK Retail Sales and Money Supply at 09.30 and it is unlikely in today's environment that they will be taken well.

Cable is still riding high on the expected interest rate outlook at 1.2745-1.2748 unchanged on the day. Minor support is at 1.2725 and resistance at 1.9775. To the down side there is room for a corrective move to 1.2600 and on the upside dealers will be looking at the highs of early December at 1.9850. The Dollar/Yen managed to hit the highs from 2005 before slipping back but we are still above all previous closing levels since the spike closing high in March 2003 (which was swiftly rejected at the time).

Our clients are setting up some new order positions to take advantage of any pull back in the yen with sell orders under the 120.75 level.

The Euro is sitting just under the major 129.80/90 pivot point which has defined much of the trading activity over the past 10 months. A break and close above here could indicate a renewed attack on the dollar a failure to move up at this point would confirm the resistance level and dollar buyers may be seen once more.

As mentioned yesterday the weakness in the Yen was not helping the attempt for a rally in gold and the resistance at 636 held fast into yesterday afternoon which prompted sellers in late activity. The trading ranges have been defining activity since late October. The charts are showing a long term contracting wedge and longer term traders are waiting for a break out of this before getting involved again. The Falling line is at 638.0 and the rising at 593. Obviously the top of this range is the closer at the moment so the odds favour a break to the upside but many a dealers has regretted precipitating a trade on the assumption of a break out that does not happen.

Having at one point looked like hitting the 50 point down level yesterday the FTSE managed a decent rally to close just 10 or so lower. This morning sees more buyers come into the markets as Oil and Metals had a good day yesterday bouncing off lows at Midday to record good gains. Gold threatened to break through the 622 support for quite some time before closing $7 higher at $632 and Oil (march Brent) traded as low as $50.75 before surging up to 52.80 at the close.

The FTSE is called up 20 points at 6224-6226 having traded for most of yesterday below the 6200 level. Our clients were buyers for most of the drop yesterday and this morning are reaping a few well earned profits. We are in a heavily traded area of the index at the moment and dealers will be looking at the 6245 resistance level to see whether this rally has further to go. On the support side we have 6190-6205 and the lows of yesterday at around the 6155 mark.

The Dax has maintained its 500 point margin over the FTSE which is quite a smart performance given the apparent good news for the Mining and Oil sectors in the UK index. The current price at 6732-6734 is just a few points away from the high of 6745 recorded on Monday. No doubt this will act as both an attraction and a resistance point. The FTSE is still over a 100 from the high print placed on the first trading day of the year.

Mothercare have disappointed with just 0.8% increase in like for like sales and total UK sales up just 1.3%. The shares are likely to come in a bit lower than yesterdays 384p close. This is another retail market that the supermarkets could encroach into.

On the FX front the Yen continues to wilt dramatically as the dollar also comes under pressure. Inflation numbers out of the states are expected to confirm that CPI is easing slightly (and with oil dropping so dramatically we can look forward to softer numbers for January and February as well). Sterling Yen is now at 239.81-239.89 up 220 pip overnight (another record level for recent times) having rallied over 1000 points since the rate hike of last week. Exports to Japan are looking less and less likely.

The Euro/Yen is 120 pips up on last night at 157.32-157.35 still a little off the turn of the year all time highs at 158.04. In conversation with a major currency player last night he was expressing surprise that the USD/JPY had not hit 121.00 as there was a major option expiry at that price yesterday and he had felt that dealers would have gone for the level. He needn't have worried, this morning we see the Dollar soaring through this technical resistance and we are now at 121.30-121.32 bang on the three year high of November 2005. There are probably a great deal of option writers at this level and the recent move may find a swift acceleration if we confirm new closing highs.

As mentioned Gold rallied strongly yesterday on the Dollar weakness and on the failure to follow through the puncture the $622 support. Further dollar weakness this morning may encourage buyers again but the worrying performance of the Yen will remove some of the Far Eastern buying. This morning sees Gold up another 3 bucks at 634.4-635.0.

Oil also rallied and is likewise following through this morning. The expected cold weather in Europe has bolstered the buyers and we may find the $50 level a tough nut to crack. This morning sees March Brent up 20 cents at 52.99-53.04. Our clients have finally gone flat on the market having suffered for most of the drop.

So inflation in the UK edges up to 4.4% and economists start to get the jitters. It is curious, reading all the articles in the various newspapers, how deferential everyone is to the BOE's handling of interest rates since they were made independent. Well I am afraid that I do not hold with this view. The reason the UK has had low inflation for the last ten years is solely due to the effects of the huge boom in Far Eastern manufacturing which has meant negative inflation on products such as clothing, toys, electrical goods etc.... Until recently the UK had, for many years, inflation below the Euro Zone and yet the MPC stuck with rates of between 2 and 3 percent higher than those prevailing in Europe. The upshot of this has been a lack of manufacturing investment (who wants to pay 5 to 6 percent on loans in Britain when they can build in Germany with rates of 3 to 4) and an ever increasing value in the pound which has hammered what remaining export business we have. Not once in the last 10 years have they grasped the nettle and brought rates down to match the Euro and now, with Gordon Brown's massive public debt burden weighing on the market and a corporate tax rate which puts the UK right at the back of the pile for inward investment, we are back in an inflationary spiral. The wage round this year will be particularly difficult and up to now the government has shown a conspicuous lack of spine when dealing with inflation busting public sector demands.

Those calling for a good performance form the FTSE this year may already be wishing to re-address their predictions and we are only into the third week of the year.

This morning sees the FTSE down some 15 points at the 6200 level again (whilst the Dax is yet again higher on the open at 6719-6721). The spread has now widened to over 500 points.

DSG International rather like the Artist formally known as Prince always seem to need the addition formerly known as Dixons (you should get your marketing and PR guys in gear) have come in with much worse data than expected and the shares have dropped some 9% to 177.9-178.4. The problem is yet again the Italian unit whilst France has also now started to slip. Woolworths reported a fall of 4.6% in sales but due to the fact that they had already primed the market this actually looks better than feared. The shares are trading up a tad at 33.75p.

SAB miller continues from strength to strength showing that they are not being left behind. The Drinks sector of the FTSE has had a storming time of it over the past few years and with disposable income the world over (not including the UK) rising we can assume that alcohol consumption will rise with it. SAB reported sales up 10%. And shares are understandably higher up 41 at 1208.4-1210.6.

FX markets are quiet with the pound regaining the small sell off yesterday to be sitting at 1.9650-1.9653. Resistance remains at 1.9690 and 1.9710 and support is now at 1.9605 and 1.9580.

The Euro seems to be stuck between 1.2875 and 1.2990 both of which are major levels. A break and close below or above these points should indicate the next direction. The current price at 1.2920-1.2922 is pretty uninspiring.

The Yen remains weak but not quite weak enough to challenge recent lows. Softness in the US economy could reverse the rather terminal decline of the last few years but for the time being selling Yen remains the favorite occupation of traders.

Gold is being talked up once more as newspaper articles comment on the average analysts target levels for 2007 being around $750! They may be right but in the short term whenever a bullish story hits the wires there is a quick rally followed by a sharp fall. At the moment too many people seem to have an interest in a higher price. Our clients are long (riding the recent rally) but most have tight stops just below the old $622 support level. Gold is currently at 623.5-624.1.

Martin Luther King's day in the states so we are not expecting a huge amount in the equity markets after the open. The actual opening levels look to be on the strongly positive side after the rather decent performance over the pond on Friday Night.

The Dow eventually closed up 60 points having been almost unchanged at the European closing so the call on the FTSE is for 25 up at 6261-6263 nicely back in the mid 6200's after a rather dodgy period since the first day of the year saw the index drop for six days in a row. The Dax is also similarly called higher at 6729-6731 whilst the Dow is closed for the day and the S&P trading off the CME which is open for the early session in Europe is holding onto gains at 1433.5-1433.9 up 1.0 over the w/e.

The FTSE DAX gap has now widened further to 470 points (its widest for some years) as Oil and Commodities weigh on the UK index. The opportunity today is for some pull back on this after the strong move in both Oil, Silver and Gold on Friday evening although the continued inability for Copper to make much of a recovery from the disastrous start to the year will hold back the mining sector this morning.

Clients continue to be in two minds over the indices, first selling then buying and the indecision seems to cross national boundaries with our clients constantly attempting to pick highs in the Dow, S&P and Dax whilst at the same time remaining faithful to the FTSE 100 and FTSE250.

AGA Foodservices (the manufacturer, amongst other things, of that most beloved status symbol of the Middle Classes the AGA cooker) have announced the potential sale of its US division, Domain. The loss making unit has been a draf on the company since its purchase in 2002 and the Board seem to have decided to offload to the local management rather than send good money after bad. The City is unlikely to take a happy view of this as it says more about the existing management and the opportunities for future growth than about a temporary decision about biting the bullet. Early calls are for 5p lower at 414p making the start to 2007 a pretty grim affair.

In the FX markets investors continue to just hunt for return. In the global markets that we all now live in where corporations can hold onto whatever currency they wish and where virtually anything can be bought in whatever currency one wishes it makes almost no sense at all to hold onto a low return investment as opposed to high one such as Sterling. The economic problems that affect the UK are also present (to a lesser extent) in the other major currency crosses so whilst the market can look forward to further rate hikes from the MPC as inflation a money supply go ever higher the temptation to buy the Pound is proving irresistible. Of course at some stage the fundamentals will turn around and the pound will be weak for structural reasons but for now the spot traders are making hay whilst the sun shines. Cable is back above 1.96 at 1..9625-1.9628 35 pips up on Friday Sterling Yen at a new high of 236.11-236.19 and even against the Euro we are now up over the 150 level for the first time since 2004 at 151.65-151.69. Clients continue to try to pick a high in Sterling but it is getting difficult to short with the moves higher forcing ever more traders out of positions. With the PPI out at 9.30 this morning we are unlikely to see a weakening in resolve as we have to assume that the Treasury had these numbers on Thursday which probably added to their decision to raise rates.

The Yen remains weak (so what's new) and is sitting comfortably above 120 vs the dollar and in the Mid 155's versus the Euro. As mentioned before the highs at 121.80 will beckon but the resistance at 120.80 and 121.30 may take some beating.

On the Commodities front our clients' faith in the shining yellow metal was rewarded by a huge rally which reversed the drop of the first week of the year. Gold moved 12 bucks higher and closed at 625.5. As mentioned the resistance at 614/615 proved vital as the break brought new buyers hurrying in the subsequent attack on the 620 resistance was an added bonus and when this failed as well traders sat on longs and went for the ride. This morning sees little change at 625.3-625.8 and we anticipate a consolidating time for this morning's session.

Oil finally managed to recover some lost ground after weather reports forecast a cold snap in the States may be on the way. The energy companies need something special to start to use up some of the distillate inventory built up over the past few months. Oil having hit 52.20 in the March Brent is now at 53.97-54.02 up 40 this morning. Longs suffering bulls will be hoping for some reprieve but there is still too much crude sloshing around the system so until this demand/supply mismatch is resolved the Black Gold is unlikely to regain bullish momentum.

A difficult call this morning with the American markets rallying from their lows (where they were when Europe closed) to end the day on the highs but with the Nikkei giving up a further 100 points overnight. Oil has also dropped even further which will affect FTSE stocks more than other indices.

That said the initial call is for the FTSE to come in 20 higher at 6180-6182 whilst the Dax is up 40 at 6604-6606. The spread between the UK and German main indices continues to widen and we are now well over 400. Clients are looking on the US rally as a good selling opportunity and we are getting 2 sellers for every buyer in early activity.

Man Group, Sainsbury and Boots are the big companies announcing today amongst a whole slew of lesser FTSE 250 and higher corporate releases. Boots has said it is in line to reach targets even though sales fell below expectations at just 1.5% up for the third qtr. The company appears to have been able to hold up margins (a good result given the supermarket invasion of their market). The shares are likely to open pretty much unchanged at 833p although we are again seeing sellers lining up on the off. Sainsbury followed Morrison's with a 5.8% rise in Like For Like sales which again calls into question the perceived 'Good' result from the M&S food arm and Man has announced a solid increase in funds under management which should underpin the shares this morning.

The MPC will decide this morning on UK rates as most expect a hike of another 25 basis points at some point in the future but not this time. The problems that they are contending with include the fact of asset value inflation (housing and shares) against a perceived slowing of growth. Given that the government is due to put a break on public sector pay awards and the worry over growth levels dealers are now starting to feel that the rate cycle from an inflation/growth view point may be over.

FX markets were getting into line yesterday for today's various announcements (the ECB will also decide on Euro rates) and yesterday's dollar rally is being paired back to some extent. The Euro which broke below the important 1.2980 level yesterday is still below it at 1.2966-68 and we are for the time being stuck in a narrow range of 1.2920 to 1.2980 a move through in either direction may give the indication of the next major direction.

Cable is now at 1.9347-1.9350 with two way business as dealers hunt for an edge. Yesterdays comment about the trading range being confirmed by the failure to continue higher above 1.94. The support remains at 1.2990 and 1.2950 with resistance at 1.9420 and 1.9450.

The Yen was the big faller over the last few days as the dollar once more pushes above 120, the Euro regaining the 155.50 level. and Sterling back above 232 having gone as low as 227.75 just four days ago. The sequence of Yen weakness followed by short rallies which has dominated the last year seems set to continue. Couples with the rate differentials in favour of virtually all the crosses means that any long term Yen holder is massively out of pocket. The sterling/yen rate has moved 15% over the past 12 months BUT the cost of holding the position would have been a further 5% on top of this leaving the currency 20% lower in absolute value.

The Yen is at 120.15-120.17 this morning versus the Dollar just 1 cent from four year lows (and this in a period when the dollar itself has been quite sick). The 121.40 highs will probably exert a strange attraction for dealers so do not be surprised if we head this way in the short term.

Gold had one of it's quieter days yesterday confirming the tight 607 to 614 range mentioned yesterday. With the dollar remaining 'perkier' than in recent times dealers will be cautious of getting too excited but conversely we have had a couple of attempts to get below 607 all of which were very swiftly reversed so the bears are not exactly bouncing up and down either. This morning we are unchanged at 611.7-612.3.

Oil continues to head lower with Brent opening 80 cents down underneath the $53 level at 52.80-52.85 (feb contract) and Nymex breaking through the psychological $54 support at 53.16-53.23. The inventory numbers showed that although importers have cut back on the raw crude this has not stopped the increase in stocks of the actual refined product. At some point the suppliers will get their supply/demand levels back in line but with the March contract now closing on the Feb (the spread was 180 cents on the 2nd Jan and is now at just 90) traders are worrying that the dislocation may take longer to repair.

With the Far Eastern markets treading in something nasty overnight the knock on this morning in the European indices will give longs a bit of a headache. Fortunately for our clients the unexpected early rally in the markets yesterday gave many the opportunity to cut their bull positions as mentioned in our commentary.

The Nikkei fell 295 points and the Hang Seng a similar sum this has meant that the early call on the FTSE is for some 35 points off last nights close at 6160-6162. The Dax is at 6561-6563 down 50 and the Dow is similarly lower but only 35 points at 12381-12385. With all the rushing around of the markets over the past few days it may come as some surprise to hear that the Dow is now exactly where we closed on Friday night whilst the Dax is off some 30 points and the FTSE (heavily reliant on Oil and Mining stocks) is off 70 points.

There was some hope at the turn of the year that the FTSE and Nikkei may have a period of 'catch up' in the New Year as investors looked for 'best opportunities' for their money in 2007 but the initial movements have rather reinforced the perception that there are better places for international funds just at the moment. If the dive in Oil and Metals can be reversed then the FTSE will probably come back into fashion.

Today sees both the UK and US trade balances so we will get both of the truly awful ones out of the way in one day. Expectations in the UK are for more than £6B (£100 for every man woman and child in the country in just one month) as the demand for Sony Playstations and BMW's shows no sign of abating.

JJB sports, Taylor Woodrow William Hill and Morrison's amongst other give trading updates this morning. Morrisons report an increase in like for like sales of 6.0% rather better than the heavily hyped M&S numbers yesterday. Taylor Woodrow have reported that profits will be at the top end of expectations and William Hill and JJB report trading in line with expectations. All in all not a bad set of announcements to start the day but they will probably be overshadowed by other events.

In the FX markets, after the fireworks of the first few days of the year we appear to have gone to sleep. The Euro continues to flirt with the major support level at 1.2980 having another go at it yesterday and sitting just above it now at 1.2993-1.2995. Our clients are buying at this level looking for the support to hold but have place stops very close at just under the 1.2970 level (in case it fails). In sterling traders are preoccupied with the top side as the pound strengthens against other currencies in the run up to the BOE rate decision tommorrow. As mentioned yesterday this is probably a buy on rumour sell on fact move. The current level at 1.9414-1.9417 is up 30 pips on last night. Resiostance is at 1.9455 and then 1.9490 and 1.9525 support to the down side is at 1.9345 and then 1.9275 so there is nothing particularly close. The data releases at 09.30 (UK Trade) and 13.30 (US Trade) may give the markets a bit of a kick start.

The support in Oil at £54.00 (US Nymex) mentioned in yesterdays comment managed to be the actual low of the day as the price dropped another 1.75 cents before rebounding on rumours of frantic OPEC consultations to close at down just 50 cents. With no end in sight to the warm weather in the US (although Europe is expected to have a cold snap soon) inventories out today at 15.30 are expected to show further increases. With tankers contuing to plow their way across the world in a never ending stream this backlog of stock may take some time to drain away. Today sees oil down 25 cents at just below $55 in Feb Brent at 54.88-54.93, although March is at 56.04-56.09 reflecting the view that the supply dislocation may be under control by then and that few energy suppliers want to take delivery of stock just at the moment.

Gold rebounded off the 607 level but could not quite break through 614 so we are now in the tight trading range between these prices. At the moment the pressure is on the top side at 612.8-613.4 but the market is very fickle and bull and bear moves are happening at a moments notice. Traders will be eying the dollar again to look for any weakness which could send gold higher once more but in a world looking for return on assets Gold trades on its 'rarity' value not on its yield which is close to zero for the average investor.

Markets were soft in European trading yesterday only to be followed by a storming US evening session

The upshot of all of this is that the FTSE is now pretty much unchanged on the week. The opening price is expected to be around 6217-19 but in all truth our clients (who were long and in a hole yesterday) have been taking the opportunity to get out of these positions in pre-market trading. With the reporting season soon to be upon us we may find that progress in the short term becomes a little more difficult as investors pull their horns in to await further information. The FTSE has a support level at 6170 (where we bounced from yesterday) and below this at 6112 and 6100. On the upside there is resistance at 6216 and 6240.

The American markets, as mentioned had a good end to the day taking the market from down 50 to close up 20 and this morning is looking strong again at up another 20 points. We are now just under a resistance level at 12450 at 12443-12447 and traders will probably wait for US trading to open before attempting a move higher. For all of the rushing around of the last week or so we are now pretty much at the same level as the close of 2006 (just a bit lower) and clients are getting into the swing of the current trading range between 12530 and 12370.

A big day on the reporting front with McAlpine, Bovis, BP, M&S and the LSE all making trading statements. M&S has reported like for like sales up 5.6% but this may not be enough for the market as they are probably looking for more to justify the rally in share value over the past few months. Food sales, for all of the advertising, were only up 3.6%. We are calling the shares down at least 15p on the open. BP will also come under pressure as production of both Oil and Gas fell in the 4th qtr, the problem for the oil companies is that they are hardly in what could be called a 'product growth' sector. In effect they must make more from the same amount to justify valuations or get into new market areas.

In the FX markets the dollar and yen have given up some ground after the new year rally gave hope to the battered greenback bulls. The Euro is now at 1.3037-1.3039 having bounce once more off the 1.2980 support mentioned yesterday. Unless we have a successful attack on this level very soon the pressure may return to push the dollar lower. Sterling has been the big gainer over the past couple of days moving from below 1.93 up to the current 1.9436-1.9439 traders are concentrating on the hoped for rate hike in the near term to bolster the pounds prospects. This may be a case of buy the rumour, sell the fact as the rate hikes are being inflation driven rather than the US's growth driven tightening phase. Once the rate hike has come long term holders may start to look at the worsening deficit problems and conclude that the dollar or Euro are a safer bet.

Gold managed to hold the 607 level (although not without a quick scare on the US open) and we are now flirting with the 614 resistance level as well. A close above 614 will encourage further gold buying especially if the Dollar continues to weaken once more. That said the market is still fragile and longs are not as confident as the once were. Some analysts are now calling for a bear phase in the Gold market citing repeated failures to go higher and a fading momentum. For these 'techies' the 550 level is exerting a pull. This morning we have 613.2-613.8.

Oil went walk-about yesterday rallying two dollars then falling three before bounce a buck once more to end the day just 5 cents from the close on Friday. In conversation with traders the important level is $54 in the US WTI Nymex. A break of this may cause some serious (even more than the last few months) selling from producers trying to guarantee income. The current price is 55.71-55.77 still some way from this point but close enough to cause disquiet.

A bit of a sell off on Friday as investors lost a bit of nerve at the highs and decided to let somebody else do the buying. In the UK Mining and Oil stocks took a hammering as metals came under pressure. Gold broke through the 622, 613 and 607 support levels before finally halting at 601.5 and the bulls (who include many of our clients) had a torrid time of it. Oil also hit a new recent low at 54.50 for Brent before buyers and Short covering pulled us higher towards the close.

The FTSE eventually ended Friday some 60 lower and this morning sees a bit of 'bottom picking' from investors looking for value from the drop. This is in line with the trading pattern of the last six months with traders enduring periods of three or four day drops before coming back on the buy side and grinding the markets higher. We are called about 10 higher at 6229-6231 and are seeing little on the sell side.

As a note of caution though, and from a personal viewpoint only, I went to the London Boat Show yesterday (the first Sunday) as is my normal annual pilgrimage. Although I arrived three hours into the day I could actually park in the Excel building, rather than endure the 'Park and Ride' and once inside was, for the first time ever, able to walk unobstructed through the exhibition. In conversation with various Reps manning the stands they were unanimous in stating that they could not remember having ever had such a quiet opening weekend. Yachting is, in general, the top end of economic pile that is the UK and if this is an indication of a pull back in luxury expenditure we could be seeing some serious slow down in the economy.

The Dax also had a pretty dramatic drop coming down some 80 points by the close but here again dealers are quick to reassess over the weekend and come in on the acquisitive side. The index is trading up 25 at 6616-6618.

On the FX side the Yen continues to recover lost ground with the Euro cross now slipping below 154.00 after coming in lower in Japan. The market has now given up the entire December Euro/Yen rally although we do have a minor support level at 153.75 and a heavier one at 153.35. The current price of 153.92-153.95 is attracting some buying from clients but they are very nervous of further fall out.

The Euro bounced off the huge support at 1.2980 (which was the high resistance level for all that time in 2006 when we were expecting the Dollar to fall and it kept surviving). We are certain to find good support at this level but everybody probably knows this and in the current dollar bull environment dealers will be nervous if the support is approached again. The current price is 1.3015-1.3017.

Gold as mentioned had a terrible day on Friday as the dollar rally drove out the weak holders. Although the Yen has move higher (which was the bull trigger most were waiting for) the Dollar moved with it and long Gold holders were unwilling to sit back and wait it out. This morning sees Gold just above 607 support at 608.0-608.6 and with the greenback slipping a little the buyer seem to have a bit of confidence back.

Oil has, likewise, moved higher recovering some of the recent losses and is now at 56.29-56.34 almost $2 from the lows on Friday. Listening to the TV commentators on that day we were getting all the 'bears' who had apparently been negative on oil for a while and were calling for drops to $45 $40 and even $20. Beware of this knee jerk reporting. It is not long since the world and his dog was calling for $100.

Ooopppps

The markets continued their impressive start to the year with the currency and commodity traders having another big trading range to contend with. The equity markets started the day lower before grinding their way back to respectability by the close.

This morning looks like being the turn of the indices once more as the Nikkei dropped 340 points last night/this morning dragging the other major markets lower on the open. The Dax is coming in at 6649-6651 down 25 and the FTSE is called 20 lower at 6266-6268. Traders will be wary of reading too much into the early moves as many were caught out yesterday on the initial weakness only to see buyers come in later on.

The dramatic fall in oil/copper/gold/silver over the past few days will continue to worry investors in the Mining and Oil sectors as many of the costly acquisitions of last year will have been based on prices made with other assumptions in mind.

Today sees the Non Farm Payroll data due out at 13.30 and expected to come in at around plus 100K. Normally the morning session of a major release tends towards the comatose but with Yen already up 90 pips vs the dollar, oil looking weak in early trade and traders worrying about Far Eastern influences we may have a rather more exciting opening session than expected.

The long awaited rebound in the Yen seems to be underway with the currency taking back three big figures against the Euro falling from 158.00 to the current 154.67-154.70. The trigger for each fall was the almost continuous breaking of weak support levels throughout yesterday and last night. Support at 157.00 156.40 155.80 and 155.50 were all swiftly defeated and day trader longs were taken to the cleaners. The medium and Long term bull trend lines are still a way away from the current levels and we could fall all the way to 151.80 without changing the long term outlook.

By virtue of the fact that it is a bigger number the Sterling Yen pull back was even more impressive dropping from 235.00 to the current 229.32-229.40 a fall of 560 points and enough to cause some painful trading losses for some. Again the long term support is still some 350 points away but sterling is beginning to lose some of its shine and with the market off some 200 points already this morning traders are understandably nervous of buying.

Oil experienced it biggest two day drop for over 2 years and notwithstanding our comments here our clients fought the fall the whole way down. With mild weather for the crucial early winter period even forecasts for a harsher time towards the end of January will only mean that existing stocks will be used. Delivery for February contract may experience some serious further erosion as storage is an expensive business so nobody wishes to be the one left holding the physical product. Oil is called down a few cents at 55.00-55.05 this morning in Brent Feb.

Gold had the good fortune to close just as the support at 623 was about to be attacked which has given the rather panicky trading conditions of last night to at least pause to take stock in the light of this morning. In two days Gold has managed to Fall $6 rally $12 and then fall $22 which has left both bulls and bears a little shell-shocked. We are still nervously close to the support level of 622 to 623 at 623.5-624.1 and a break may well give bear raiders the chance for a push to the 613 level. Bulls will be heartened by the apparent unwillingness to sell lower than here so our clients are coming in on the buy side this morning but with stops very close just below 621.

What a start to the year! Huge rally followed by big sell off what more could day traders want?

The FTSE is opening down 40 points at 6280-6282 in reaction to the 140 point drop from the highs in the Dow and the Dax is likewise weaker down 45 at 6645-6647. There appears to have been little reason for the US fall and we are probably looking at some profit taking from short to medium term traders who have seen much bigger returns than expected for 2006 and do not want to be seen giving it all up in the first few weeks of 2007.

The dow traded down to the medium/long term trendline support at 12395 and then had a small bounce towards the close but dealers will be focusing on this level as an attempt to break it could cause a rather more aggressive profit taking stance. The opening level at 12440-44 is well off this support but given yesterday's activity not so far that it might not have a sort of 'fatal attraction'.

Virtually every market (aside from European equities) moved 'big time' at some time during yesterday's trading session as the Americans worked off their enforced four day holiday. Gold dropped $12, Oil dropped over $2 the Dollar rallied over 1% (even the Yen managed, finally, to reverse some of the Euro and Sterling rally) and silver having started the day 14 cents higher ended it 50 cents lower, a fall of 4%.

This morning sees further dollar strength with the pound following on from the 220 pip drop yesterday with another 90 this morning. We have now dropped from 1.9725 to 1.9400 in just two days. If we close below 1.9435 this evening the long term rally will have been broken and we could be in line for a more substantial drop towards the 1.8500 to 1.9075 trading range which dominated the Aug to Nov trading period last year. Traders may look to buy the currency this morning to take us higher than the 1.9435 level, the current price is 1.9410-1.9413.

The Euro (whilst also having a poor day yesterday) is still above volume support levels and with the latest economic data out of Germany proving to be so good and with rates at above 3% and looking to go higher the outlook is not so cloudy as for the pound. But it must also be pointed out that yesterday saw a break of the medium term bull trend line at 1.3165 and with the market now trading at 1.3110-1.3112 dealers will be wary of being caught in a Bull trap there is support at 1.3090 and 1.3050 but below here we may be looking at a return to the 1.2400 to 1.2980 range which dominated the second half of 2006.

As mentioned Gold fell some 12 bucks yesterday and our clients were shown to be wise in their profit taking of earlier in the day. Today saw a small attempt to rally up to the 630 level but this has been swiftly reversed and we are now down at 624.8-625.4 just above the 623.0 support level. We bounced off this level yesterday and remaining bulls will be hoping for a repeat performance today. A close below here would open us up for a move towards 613 and then 607. If it holds then the odds change to favour a return to 632 and then 644.

Oil (as feared in yesterdays comment) came under pressure again and once the 59.50 support in Feb Brent was breached we swiftly fell to the mid 58's before closing down at 58.00. Unfortunately our client attempted to oppose the move throughout the day and took a serious bath. We have bounced a few cents this morning but traders are increasingly wary of any rallies and falls are getting harder to stop. Early call is at 58.17-58.22 up 20 cents.

Clients had their best ever day yesterday which is odd because the previous 'best ever day' was the first trading day of 2006 as well. The Rally of close to 100 points in the FTSE and 140 points in the FTSE 250 had our clients jumping for joy as they were net long of every single FTSE 350 stock bar British Airways (as mentioned last week).

Such one sided opinion normally means that the markets are overbought (or oversold) as the general view is that if everyone is long who is left to buy some more? Happily the economic view is still benign and although the growth in the UK is almost entirely due to either the government printing money or the powerhouse of the City of London this situation probably has some way to run before the markets exert pressure on UK public sector borrowing rates.

The FTSE is trading down 8 points this morning with some slight profit taking coming in (a natural reaction to yesterday) our clients are not losing patience though and remain on the buy side picking up Banking and Mining stocks on the open. FTSE 100 is quoted at 6302-6304 (above 6300 for the first time in 4 years). The Dax had a similarly strong performance and is trading at 6680-6682 unchanged on the day. With the American markets closed yesterday we are calling the Dow up 75 points at 12542-12546 (another record high) and the S&P at 1427.5-1427.9 although in this case we are still below the highs of pre Christmas of 1432.0 (caused by a spike over the december option expiry).

Majestic Wines goes from strength to strength showing the way for companies attempting to challenge the Supermarkets. Although Tesco and Sainsbury have quite substantial wine departments Majestic have focused on the higher end and have found a rich market to dominate. The shares are up 7p this morning at 358.5p a new high on 4.4% like for like sales growth.

The Yen continues to weaken (blah blah blah) as the Thai baht comes under pressure due to a variety of problems (not the least the bombings in Bangkok over the New Year). Whilst the Euro is threatening new highs against the dollar the dollar itself is only 2 cents from four year highs against the Yen!! Combine these two facts and you can see the problems. Unfortunately the Japanese central bank has a twin problem. The structural weakness of the banking sector and the huge government borrowing levels. Both of these problems would be seriously impacted by higher rates but on the other hand there is no incentive to either to clean up their act whilst they can borrow at such low rates. The market knows this and in the circumstances can see only a one way bet for the currency. Although the European Central bank is not happy with the situation the are (at the moment) not willing to stand in the way of the express train that is the Yen. They will probably wait for a pause or a pull back before attempting some intervention.

Eur/Yen is at a new record high of 157.90-157.93 sterling likewise at 234.60-234.68.

Gold is reacting to the small dollar weakness and the dubious "European Central Bank Buying" story is slightly lower this morning at 637.0-637.6 and bulls are slightly nervous as we failed to attempt the resistance at 644 yesterday. Our clients are losing their long book a little which appears to be a reasonable choice given the rally over the past few weeks.

Oil remains weak having rallied slightly in early trade yesterday on fears of upheaval over the Saddam murder (sorry, i meant 'lawful execution') but the weight of oversupply continues to drive prices lower. Most producing nations need what money they can get for funding other parts of the economy (Iran, after 30 years of oil, effectively free(!), income still has over 90% of its earnings tied up in the commodity). Feb Brent is at 60.08-60.13 down 35 cents this morning. Heavy support remains at 59.50 and near resistance is at 60.72.

With the Americans taking the day off in memory of that most forgettable of US presidents Gerald Ford (funnily enough I cannot remember the rather more important Richard Nixon being accorded this honor!) combining with the 'Golden Week' holiday in Japan we expect a slow start to the New Year.

The FTSE looks to be recovering some of its last day fall out and we are looking to open some 10 points higher at 6230-6232. This is not particularly spectacular when weighed against the opening move on the Dax which is now 40 up at 6636-6638. The FTSE has struggled to keep up for most of the last 12 months and spread traders trying to sort the Dax/Cac/US versus the UK leading index have generally been paying for it all year. As mentioned before in this comment the FTSE started 2006 250 points higher than the Dax and ended it 400 points lower. We are getting buyers in pre market activity as our clients feel that we are calling it a little too cautiously.

The FTSE 250 was a better performer, probably because the index is rather less focused in its weightings; the FTSE 100 is basically massed in Banking, Pharmaceuticals, Oils, Mining and Telecoms which, whilst obviously important, are not incredibly representative of the British Economy.

Dealers will once again be girding their loins for the fight with trading in the currency markets taking the initial lead. Come the New Year come another attack on the dollar with the Euro and Pound moving higher. The Euro has broken out of its small downward trend and is forging ahead up 90 pips this morning at 1.3260-1.3262. There is some small resistance at 1.3280 but traders will be looking for a renewed attempt at the highs of 1.3370 if the year end dollar weakness is to be built upon. Given that FX is a 24 hour market there has been a rare 'gap' higher this morning as buyers come in on the off.

Cable has been dragged up by the Euro and is trading up 96 at 1.9682-1.9685, we have had an initial attempt at the resistance levels at 1.9700 which have (for the time being) held. Our clients do not appear to be convinced by sterling rally this morning and we are getting continued selling by traders trying to pick a top. There is some support at 1.9675 and lower at 1.9656 and down at 1.9575 the rising trend line support.

The Yen continues to plumb new depths with seemingly nothing able to stop the falls against the Euro and the Pound. The Euro/Yen is now at 157.26-157.29 again at all time highs ( I am getting bored of that statement) and Sterling is at 233.57-233.65 up 20 and also (if we close here) at highs.

Precious metals markets look to be on the up once more with Gold and Silver both continuing the year end rally. Silver has managed to break through the $13 barrier in early trade and is up 16 cents at 13.08-13.11. Our clients have remained long of the market through the recent drop and have added to positions. The hope for traders is that we will try for the $14 level once more in the coming weeks. Gold is boosted by the weak dollar this morning and we are approaching the $644 resistance level with early calls at 639.0-639.6.

Oil actually had a pretty dire 2006. Whilst the outright, NYMEX front month, price at the end of the year was (almost unbelievably) exactly the same as the closing price on the last day of 2005 this ignores the fact that 'forward' oil was at a premium for the whole year. So that a 'long' trader rolling from month to month would have lost over $10 (16%). Brent is opening quietly this morning and dealers will be wondering whether the 'Saddam' question will affect the OPEC regions and thus the oil flow. The appalling pictures over the holiday period seemed to show an awful man as a dignified hostage being executed by hooded gangsters. I was reminded of all those video tapes of Foreign hostages being executed by Islamic rebels. It seems that the Americans, in handing him over to such people, may have triggered the very Civil war that they have tried to prevent for so long.

A big day pushing most European and US markets to new closing highs for the year. We open pretty much at the highs reached yesterday with investors confident that the run of the last few years will continue into the New Year.

The FTSE is called some 10 points higher at 6254-6256 and the Dax is likewise called the same amount up at 6618-6620. The FTSE did actually trade higher than this in two trading sessions last week but was unable to hold onto the levels. There is very good support at 6235 to 6245 and minor resistance at 6270.

The Dow has closed above 12500 for the first time ever and it must be beginning to look a little cold up here. Any remaining bears must be clinging on by their fingernails. The close above 12490 was very encouraging but dealers were unable to take the market further which could well weigh on expectations. A failure today to hold onto the 12490 level will be taken as confirmation of the top by many technical traders. We start off a 12502-12506 down about 5.

Our clients continue to be exceptionally bullish for the UK with overall longs in every single FTSE 100 stock except (for some reason) British Airways, possibly the recent rally on the Quantas deal has been felt to be unwarranted. Given that the shares were just about the only faller yesterday it seems that clients have (for the moment) picked the right share to be short of. At 522.5 it may be beginning to look a little cold up here.

Currency markets gave some hope to the dollar bulls with a pull back on the Boxing day retreat. The Euro starts at 1.3122-1.3124 where. . We closed yesterday. Support remains at 1.3080 to 1.3095 and resistance at 1.3165 which defines the recent falling trend line resistance and then at 1.3205. Sterling remains range bound between 1.9705 and 1.9475. Over the past few trading sessions we have seen several 'inside days' where the markets trades for the whole day within the range set on the previous session. This is often taken as an indication that a big move is imminent. The better odds (with the market at current levels) is for a move lower but it depends on a close outside the range mentioned above.

The Yen made a small recovery against the Euro yesterday but the trend is still very much against it at the moment. There is a major support level building at 1.3555 (we traded below here yesterday but could not hold there) a close below this could indicate a retracement of some of the move to date. We are now at 155.85.155.88 unchanged overnight.

Gold having moved higher over Boxing day and in early activity yesterday then proceeded to do absolutely nothing for the rest of the day. Bulls we take this as indication that the market is happy with the current levels and will build for a move higher whilst bears will comment that there is no appetite to buy above 628 and that the resistance at 632 has not even been attempted. This morning we are at 627.6-628.2 exactly where we closed.

As feared in yesterdays comment Oil is looking a bit sick again. We closed on the minor support at 60.45 down 70 cents but as mentioned yesterday dealers will be eying the 59.50 level. The OPEC production cuts should be coming into the equation soon but traders seem to be a bit jaundiced by these kinds of manipulations as the opportunity and temptation) for illicit pumping generally gets the better of one or another of the member states.

The US decided that Boxing day was another good time to have a pop. With the rest of the world asleep (or at least suffering from xmas overindulgence) the Dow and S&P reversed Fridays fall out and closed on the highs followed by a further rally this morning. At the close on Friday the call on the FTSE was for 20 points lower but the moves of yesterday and early this morning brought out the buyers once more and the bulls have taken the market on once more.

The FTSE was called up 20 points but after just a few minutes this was turned into almost 50 points and is now at 6246-6248 and the Dax outdid even this and is now 80 up from the close before Christmas at 6583-6585. Dealers will now be hoping for a real rally into the close of the year with the possibility of closing at the peaks for the year.

In the currency markets we are still in the trading range of the last week or so and although the dollar is slightly weaker this morning we have in reality been drifting from the peaks seen in early December when the death of the greenback was headline material. The Euro is at 1.3154-56 and Cable is now at 1.9602-1.9605 both are up about 60 pips from last night.

The Yen continues to have few friends with the Euro/Yen still near all time highs at 156.06-156.09 and Sterling still above 232.50 at 232.60-232.68.

Gold has managed to reverse the recent falls and is now at 627.-627.6 having briefly hit 630 yesterday. Metals are expected to continue to be in demand with production increases possibly failing to keep up with demand. Gold is still below the resistance levels at 632 but another day like the last two would see us into the higher trading band. Bulls will be wary of a dollar rally which could cause some selling in precious metals in the short term.

With winter weather seemingly benign this year Oil is drifting once more. Dealers will be eying the lows of November at around $59.50 (Feb Brent) fearing a break might cause some further fall out. At the moment we are trading at 61.15-61.20 but the sellers seem to be having the best of it at the moment. Support is at 61.00. (ish).

A rather worrying day in the FTSE yesterday with the rest of the world seemingly taking part in a pre Christmas push the UK markets went into reverse closing down on the day (again) when the Dax, Dow and S&P have all remained at or near their year highs. Since the expiration of the Index options on the FTSE 100 the index has given up 100 points and is looking a bit stodgy.

The Dax is contracting around the highs with the last five trading days ending within a sixteen point range (21.00 close). In that time we have three failed moves higher and one lower. This type of trading activity normally indicates a pressure cooker situation with the market likely to break out dramatically in one direction or the other. With the current economic situation looking quite benign the odds must be on further price gains but the events over in Thailand show that there is still the possibility of disastrous volatility.

This morning we have the Dax at 6567-6569 down 20 points and the FTSE at 6190-6192 down 10. Clients are still positive on the UK index and we continue to get buying coming in even as we drift lower. There could well be a bullish impetuous in early activity as we enter the last full trading day before Christmas.

There is very little corporate news this morning as investors and fund managers tend to take a dim view of companies reporting so late in the 'party' season. That said Persimmon have come with good trading numbers (not surprisingly given the housing market at the moment) and with revenue up some 35%, helped by the Westbury acquisition, the numbers make good satisfactory reading. The first indications are that traders are marking the stock down about 2p on profit taking but our clients are remaining long.

Today sees the UK current account balance at 09.30 which could cause a ripple of excitement in the FX markets as traders continue to explore the weakness in the Dollar and Yen. Euro/Yen has hit (another) all time high this morning at 156.45 as a large buy (stop) order was triggered in Europe. Traders have swiftly sold the currency back down again and this could well trigger some profit taking throughout the day. Support is at 155.85 and resistance at 156.35. Sterling/Dollar (Cable) has had nine down days and only three up days since the 1st December so it is quite surprising to see that we are only 100 pips away from the close on that day. This indicates that day traders are selling but are very nervous of any dollar strength. Today, at 1.9681-84, we are 45 pips up and looking good for the pre-trade figure session.

Precious Metals were solid in trading yesterday with Platinum, Gold and Silver holding on to the gains of Wednesday. Silver having been the solid for much of the past few months had it worst day for a long time last Friday and dealers are hoping that this weeks consolidation will auger well for a move back to the tops again. Gold had a probing day looking above $623 and down to 619 before closing exactly unchanged at 621.9-622.5 (where we remain this morning). The bullish momentum of Tuesday has dissipated somewhat but traders are likely to remain on the buy side as they have done for most of 2006. Support remains at 614 and resistance just above at 623.

Oil seems unable to decide what it wants to do with shifts up and down on a daily and intra daily basis. Today is the turn of the bears to make hay with a straight reversal of yesterdays rally taking us to 62.66-62.71 (in Feb Brent) down 45 cents and back to where we closed two days ago. Inventories were inconclusive and with the weather in the states easing a little energy sellers have the upper hand this morning.

After the falls of yesterday dealers were fearful for the open this morning but the late rally in the states and the massive rally in Asian stocks overnight has put a decidedly different outlook on things.

Thailand reacted to the 15% fall of a few days ago with a 10% rally this morning, this helped the Nikkei to a 200 plus move higher. Traders were looking at the FTSE to open just 10 points up but the call was too pessimistic and we have come in on the off at 6228-6230 up 25. The Dax has done even better and is now back at near the highs at 6600.

Clients were pretty mixed with dealers heavily long of the FTSE but similarly short the Dax, Dow and S&P. Heavy resistance in the FTSE remains at the 6236 to 6244 level just a few points higher than here. With a fair wind we may get an attempt at this through the morning. Another failed attempt to close above this point would certainly be negative and we will probably see the technical guys sit on the sidelines for the day awaiting the result. A close above 6244 will bring in the buyers a close below 6236 the sellers (a fine line in the run up to the end of the year).

HMV has come in with a decidedly poor trading statement which will knock the stock this morning with dealers calling for a 6p decline. The shares have clean missed out on the rally of the past three years and with internet downloads (both legal and illegal) still impacting revenue the market for highstreet cd sales looks to be searching for some new impetuous.

Aegis has reported earnings in line with expectation but is indicating a pick up in business in continental Europe which should underpin the stock this morning.

On the FX front the Yen continues to plumb new depths. Versus the Euro we are now above 156.00 at 156.15-156.18 showing a new (please put another record on) all-time high. Sterling Yen has now put on 10 points since mid November and is trading at 232.90-232.98 having hit 233.25 overnight.

As a classic lesson in how FX markets no longer follow any link with trade deficit numbers the performance of the Yen is educational. Japan has had a trade surplus of Billions of dollars/euros/pounds a month for the past 20 or more years and yet for all that the currency has done virtually nothing. Much of this is due to the huge budget deficit and the near zero interest rate returns but even so the net trade balance should count for something. The fact is that the average private citizen/fund/bank etc in Japan, in desperation to get some return on their money, is forced to sell Yen at no matter what level for Euros, Dollars and Pounds and then take the revenue from there.

That said the charts are beginning to look stretched and with the holiday period coming up there is the danger of a very swift correction.

Gold had a good day yesterday but failed to close above resistance of $623. Buyers continue to come into the market and with the dollar weakening again bulls can sniff their chance. The commodity is still trading in a distinctly range bound manner 606 to 614, 615 to 623, 624 to 632, 633 to 647 and traders will be watching to see if we can break back into the higher bands. Current price of 622.0-622.6 suggests we may get an attempt to the up side today.

Oil helped both the bears and the bulls yesterday initially falling to 61.50 for February Brent and then rallying all the way to 63.25 before closing at 62.75. Today may be a bit quieter as we await the latest US inventory numbers at 15.30 this afternoon.

Finally the Dow ended a day on the weak side which has continued into this morning. Are we about to see some profit taking or is this just a small blip on the way to greater things? The FTSE seems quite unfazed and is opening just 20 points off at 6225-6227. For all of the bullish moves over the past few weeks the index has yet to close (on a Capital Spreads quote basis) above the highs of Mid November and dealers may now be fearing a drop back into the low 6100's. That said the voracious appetite for takeovers/mergers and private equity acquisition shows no sign of abating even if the 'powers that be' seem worried. The average private equity deal is still done on 7 times earnings or put another way, 14% returns. Forgive me for being picky but with borrowing at 5% this still seems a pretty good prospect.

Dax is looking a bit weaker than the FTSE but this is not surprising given the extended rally in the index. At 6561-6563 down 35 we are 50 off the highs of yesterday and our clients who are short are breathing a sigh of relief. The market has actually broken through the short term up trend line and may (in any case) be due for a bit of a correction. Support is some way off at 6495 and 6475.

Britvic appears to be the latest target for the market with AXA selling a 9% slug of stock after hours yesterday at 280p (17 above the close). The shares look to be opening at this level which indicates that the market does not expect a battle for the stock and also that investors would be happy to be shot of it at that price!

The FX markets are behaving very strangely as dealers scramble to understand the sudden spike in Sterling. With the Euro up 30 pips and the Yen down 5 the pound has managed to rally 120 pips against the dollar. This of course means a 160 pip move versus Yen and a 57 pip rally over the Euro. Rumours are for a big buy order but there does not appear to be any fall out yet.

Clients have bought into the rally but will be smarting from the initial move which caught many traders short.

Gold is recovering from the drop of the last few days as the dollar weakens slightly our clients remain stubbornly long as they have been for virtually the whole year (bar the odd day or two). With rates at 5.25% and no return on the asset the price must rise some $35 just to make up for the 'cost of carry'. The current price is 616.2-616.8 up $2 this morning.

Oil managed to reverse direction with a vengeance yesterday falling 150 cents to the close. Traders were caught in a long bear move with no sharp drops just a steady drift lower. This kind of move can prove to be very expensive for day traders as they unsuccessfully try to 'pick bottoms' throughout the trading session. Feb Brent is quoted at 61.99-62.04 and is currently in a sort of no mans land nowhere near supports and just as far from resistance.

The FTSE managed a new high and also succeeded in closing above 6244 the resistance level from October and November. Unfortunately late (after hours) selling took the Futures down to around 6230 as investors worried about remaining too long over the Christmas period. Shorts will be hurting at the moment as the index has managed an 'almost' unbroken run of 10 up days since the start of the month. The bears will be hoping that as the year comes to a close there will be a short period of profit taking before the 'window dressing' of the last few days of the year. But to be honest the Bulls appear to be holding all the cards at the moment.

Early calls on the FTSE are at 6243-6245 down 15 points and bang on the aforementioned resistance. If the market opens significantly below here we risk an 'Island Reversal situation' which is take by chartists as a good signal of a market peak or trough. Whilst the FTSE has managed a 250 point rally the Dax has put on 400 points since the beginning of the month, peaking on Friday at just over 6600. This morning we are 15 lower than here at 6585-6587 but any sellers are being very cautious. Bears have been well and truly mugged over the past few weeks. Support in the Dax is at 6572 and then way below here at 6475.

The Dow and S&P continue to find buyers as the information out of the states begins to look distinctly 'soft landing'. Inflation appears to be under control and the various economic indicators are sufficiently confused as to add weight to the view that markets will benefit from the softly approach from the Fed over the past few years.

Today sees interims from Photo Me International. Investors will be hoping for some good news from the board as the shares sit at the lower end of their three year trading range. Early Calls are at 91.5p unchanged from Friday.

FX markets will be looking to recover some of the lost ground of last week as the dollar has continued to strength after the last rites had been awarded two weeks ago. The Euro is some 270 pips from the highs of the end of November and traders (and our clients) seem to be continually trying to call a bottom to the fall. The weakening situation in the States should eventually cause the dollar to fall but for the moment the markets seem to delight in confusions and contrariness.

The Euro is at 1.3091-1.3093 and support is at 1.3065 and then down at 1.2980 which was the top of the trading range before the break out last month. To the upside a close above 1.3130 may signal a renewed attempt higher but we could do we a period of stability this week to give dealers a chance to draw breath.

Cable is higher this morning but has already had a (failed) go at the 1.9578 resistance level and is now at 1.9555-1.9558 up 40 pips and we are still finding buyers looking for a nice little earner before Christmas.

Gold (as feared) ran into some solid selling after the support at $622 failed falling straight down to the next support level at $614.5. Clients were caught the wrong way round on the fall and the pips were certainly squeezing as we hit the lows. Surprisingly very few positions were closed out and traders still appear confident of a return to bullish momentum once the dollar stops rallying. The momentum of the bull market seems to be drifting slightly now as we contemplate the possibility of the second failed rally in the yellow metal since the falls of May/June. It is also slightly worrying that the market (even though the dollar went into free fall) never even approached the 666 high of the July rally.

February Brent at 63.45-63.50 is looking solid and OPEC will be hoping that the recent productions cuts will finally make a difference. The price seems well supported at 61.25 and with the weather turning colder hopes for a rally are possibly (this time) to be fulfilled. Traders will still be wary of inventory numbers from the states which seem to oscillate dramatically every week.

A day that started quietly steadily built up to a crescendo as indices across Europe and the US hit new highs for the year.

Unfortunately as mentioned yesterday our clients spent most of the day selling out of longs and so missed out on the final move higher. This morning sees the European reaction to the final shift up in the States and the FTSE is called some 18 points higher at 6243-6245 and the Dax is 25 to the good at 6576-6578.

The FTSE has still not hit the highs of Mid November at 6256 but dealers will probably have a pop at it this morning. If the FTSE does open up at these prices it will create a gap in the charts from 6230 (as only the SB companies quote the Index out of hours) which may act as a drag on sentiment.

There is very little info out this morning with Centrica and Arriva due to give trading statements and UBM already out saying that trading is inline with expectations. Centrica investors are hoping that the falls in wholesale energy prices will mean much bigger margins on retail sales as they have not reduced consumer tariffs at all. The company is probably willing to ride a bit of political flak in the short term to bolster winter returns before announcing price cuts in the spring.

In the FX markets the dollar continues to confound the bears by putting in another good day on the markets this is the first time in quite some time that the greenback has managed two solid up days in a row. As mentioned yesterday there was support in the Euro at 1.3200 which had held on previous days but when broken yesterday immediately attracted further sellers. There has been little action overnight (indeed the Nikkei itself only managed an 80 point rally) and the Euro is stable this morning at 1.3166-1.3168. There is solid support from November at 1.3130 but if we close below here there is quite a long way to the next volume area.

The pound managed to do better than the Euro and has still not given up the rally of Tuesday. Dollar bears will take some comfort from the fact that although the Yen and Euro are looking tired the Pound is still well within the Bull Run range. To turn fully bullish on the Dollar we would need to see all three go negative (as we needed all three to go bullish to achieve the rout in November which had been threatening all year). At 1.8637-1.8640 we are well off lows for the day and our clients are cautious buyers.

That said the Yen still looks a basket case. Dealers are now looking at levels just a few cents off the yearly lows of 119.90 versus the dollar at 117.88-117.90. Against the Euro and the pound we are now at prices that must be seriously worrying the ECB and BOE. Having started the year at 139.00 the Euro/Yen is now at 155.25-155.28 (an all time high) and the move appears to be accelerating. Against the Pound we have moved from 203.00 to the current 231.37-231.45 a move of almost 15%.

Metals had a mixed day yesterday with Gold falling slightly but Platinum Silver and Copper all rising. Although Gold had a poor day it did not challenge the supports at $622 and this morning is at 626.7-627.3.

Oil rallied strongly on OPEC's announcement of a further cut in production but as this cut is due to come in late February (after most of the winter buying has finished the impact may be muted). At least we broke the eight day losing streak but that was looking probable anyway as the market seemed to be taking more and more effort to move lower each day.

The markets were looking a tad tired yesterday so the boost from the Far East is a welcome push for our bulls. The early rally in the Dax and FTSE has run into some profit taking and our remaining indices longs appear to be happy to take a few profits.

The FTSE got as high as 6227 in early trade but the markets are suffering from the fact that the LIFFE exchange has managed to crash this morning and so dealers are nervous of getting caught out. The FTSE is now at 6211-6213 up 20 points overnight with the Dax continuing yesterdays move at 6536-6538 (EUREX is working fine). Whilst the Dax is in clear air at new highs for the year the FTSE is still struggling to breach the 6214 closing high and the 6260 traded high.

The Dow continues to threaten to break higher without actually doing so. The 12360 (ish) level has now been hit four times in the last month without a break through and in fact the market has not managed a close above 12334 on each of those four occasions.

HBOS, Partygaming and Capita all came in with solid trading statements which will bolster overall confidence. Party Gaming is still languishing at the bottom end of its trading range at 28.5-29.0 up 0.5p. HBOS is up 19p at 1103.4-1105.6.

In the FX markets the focus yesterday was on better than expected sales data out of the states which gave dollar bulls hope for a rebound. Sterling held up better than the Euro which dropped some 70 pips on the numbers. Since then the dollar has stabilized and the bears look to be sharpening their knives once more. Euro is at 1.3231-1.3233. Support remains just below 1.3200 (it held there yesterday) and resistance is at 1.3280-1.3335 and 1.3365.

Sterling is still strong but the daily trading ranges are getting very wild with rallies and falls occurring several times a day. Today at 1.9669-1.9672 we are unchanged and not looking particularly bouyant after an attempt to the upside was sold off. Support is way down at 1.9600/1.9610 and resistance at 1.9715 and 1.9735.

Gold made an attempt at the bottom of the 622-632 trading range after the sales data yesterday but this was swiftly reversed and we closed almost unchanged again at 627.5. This morning at 628.2-628.8 dealers continue to look to buy on any dips and we will be watching for signs of Yen strength which could give the bulls the opportunity for an attack on the 632 level.

Oil. Hopes of breaking the downward trend failed after the inventory numbers yesterday even though they were weaker than expected. This makes eight straight losing days on January Brent but the going is getting harder with just small dips being recorded each day. Today we are 25 cents higher at 61.56-61.61 and it looks like the 'bottom picker' are out again. We have been here before as in nearly every trading day we seem to start off higher and then drift down. Still, the trend must be broken at some stage (maybe today?).

A bit of a reaction this morning as some small profit taking comes into the markets. The FTSE looked like joining the rest of the world in moving higher yesterday but continued selling kept the Index to just 7 points higher and this morning even this is being given up. Comments yesterday about the near term resistance at 6185 must have been read by a lot of traders (!) because we hit the level exactly before slipping back throughout the day.

The UK continues to under perform the other world indices as the strength of the pound coupled with fears over growth, tax rates and government deficits all combine to keep a cap on too much exuberance. This morning we have the early call of 6150-6152 but are finding few buyers coming in.

The Dax had a look at the highs of earlier this month but also failed to make progress (as with the Dow and S&P) and has slipped back to 6461-6463. The high of 6194 is still within striking distance and another rally like yesterday would see us through. Clients, though, continue to be cautious of European equities and are flat to slightly short at the moment. There is a support level at 6450 and 6430 which if broken (and closed under this evening) could indicate a short term reversal.

On the equity front Cadbury have come in with a plus ca change, ca change kind of statement saying trading in line with expectations but that they will take a hit over its problems in Nigeria. The company seems to be hitting a poor run of luck at the moment after the salmonella problems earlier this year and now this. The shares are opening unchanged at 535.2-536.1 but buyers are likely to drift in on the hopes that the problems can be consigned to 2006 and 2007 will put the company back on track.

Johnson Press has announced a sharp drop in employment advertising which (in economic terms) is like a first cuckoo of spring statement. If companies are cutting back on hiring this will impact the unemployment levels/retail sales/government income etc.

FX markets looked boring yesterday until a late afternoon surge in Euro and pound took the edge off recent dollar strength. The Euro looks quite comfortable above 1.3200 and bulls will be hoping for a retest of the highs of last week above 1.3350. This evening sees an FOMC policy statement at 7.15 (UK time) to go with the US trade figures due out at 13.30 this afternoon. A continuation of the slightly weak numbers or sentiment of recent months could se another attack on the green back. The Euro at 1.3234-1.3236 is unchanged this morning the pound a little stronger at 1.9590-1.9593 and the Yen struggling to fight back is at 116.83-116.85 (still well off the highs of recent days).

Gold and Oil had quiet days yesterday Gold drifting a few bucks higher and Oil doing the opposite settling 50 cents down. Gold at 629.5-630.1 is still under the $632 resistance level which could act as a barrier in the short term. Oil has now gone down six days in row (although the total move has only been $2.60 and traders will be hoping for some relief today. The recent cold snap in the states took us up to the recent high point of 64.75 (January Brent) and longs will be hoping for further weather related spikes. Today sees the price at 62.00-62.05 up 19 cents.

Shortest ever pre-budget report

Spread-betting firms which took wagers on the length of Gordon Brown's speech today are licking their wounds after it turned out to be his shortest ever pre-budget report.

Cantor Index offered punters the chance to bet on whether the speech would be longer than 45 minutes or shorter than 42 minutes.

It came in at just 37 minutes, netting some tidy pre-Christmas windfalls for all of those who correctly predicted the chancellor would have little to say.

"Some quite shrewd people around thought that there wouldn't be much content he would read out," said Cantor's David Buik.

"A lot of people just used their intelligence and thought 'now, he's going to say enough but not too much'," he added, confirming Cantor will be paying out £4,700 as a result.

Capital Spreads Market Commentary

Surprisingly, given the late weakness and the fall in Oil in late US trading on Friday, the FTSE has managed to follow the Europeans and the Far East with an opening move higher. The FTSE is called at 6166-6168 up 15 but we are seeing solid buying on the off this morning so we may have a good start to the last full weeks trading before the Christmas break (next week tends to be a bit dull as lunches, nativity plays, early leavers etc take their toll).

Since the fall from mid November the market has had quite a nice December rallying from just below 6000 up to the current price. There is some slight resistance at around 6180-85 but a break of this would encourage moves up to the highs of 6250. The Dax has had a similarly splendid start to the month and is now at 4960-62 just 30 points off the highs of the year.

Not much on the corporate front this morning with Isoft still recovering from accounting scandals of the past year looking interesting. The shares are up 5p this morning,12%, on announcements of possible takeover talks but I fear that the group will be snapped up for less than is hoped. At 46.2-46.6 this morning our clients are cautiously buying.

FX markets are peaceful this morning with little to go on. The Euro is strong and the Yen is weak and Sterling is just in the middle. Yen is back at the high 116's after flirting with breaking the 114 level last week after the stronger than expected NFP on friday. Weak numbers out of Japan gave little hope for further rate hikes fro the land of the rising sun in the near term and the currency reacted accordingly. There is strong resistance from trend line and fixed point factors at around 117.40 and support at 116.55.

Sterling is sitting comfortably just above the 1.95 point having peeked lower during the early hours as the Far East hit a low at 1.9465 but we are now back at Fridays closing levels at 1.9530-1.9533. This level is quite an important one being the high of the first shift higher on the 28/29 November. A close above 1.9535 could indicate a resumption of the move higher. Eur/Yen is at a new record high this morning as we approach the 155 level. The previous high of 154.10 has been breached and we are now at 154.27-154.30. The Europeans are generally more concerned with the level of the Yen and its satellite currencies than with the dollar and this continued pressure on the attraction of Euro land exports will be worrying government ministers.

There is the possibility of a December Central Bank raid on the Euro/Yen as in weak market conditions (illiquid because of fewer traders around) the EBC will get more bang for its buck.

Gold remains on the weak side this morning after an attempt to move higher on Friday failed dramatically. Newspapers are once more full of stories about how cheap Gold is and I have become slightly cynical about these as they only seem to appear after a bit of a fall. The impression is formed that some brokers are long (as they have been for quite some time) and they release bullish stories whenever weakness appears. Rolling Gold is at 625.6-626.2. Silver remains strong even after the fall of Friday and we are still within striking distance of the highs of May. Silver for March is at 13.86-13.89.

Oil has been rather disappointing having looked like pulling out of its slide in late November only to be dragged back into the trading range off recent months in the last few days. Brent February is at 62.69-62.74 up 15 cents this morning.

The FTSE comes straight out of the stalls rallying 10 points after being called down 10. The reason appears to be a bid for Gallaher from Japan which has had a major knock on effect to the other Tobacco companies. Gallaher is up almost 200p to 1175.0-1176.5.

With investors becoming ever more confident of a 'soft landing' the scales are starting to slip towards some form of strong 'correction' to the market. Volatility levels are still at record lows and veteran traders know that, just when everything appears fine, that is when the markets go into overdrive. Our clients are long of every single FTSE 100 stock (bar two) which effectively marks a 98% positive vs 2% negative, a record for us.

As mentioned yesterday there is strong resistance in the FTSE index at 6100 to 6105 and we had a solid go at this yesterday and another on the off this morning. Another failure could signify a triple top which on a pull back is generally seen as a good reversal indicator. At 6097-6099 just now, the market is still looking positive and a break higher should trigger quite a bit of short covering from index bears. The near term target on the upside is 6150 and 6030 on the down.

Gordon Brown tax and spend policies continue to worry especially the revenue side as with so many major UK companies being taken over by foreign units we may find that the corporate tax returns start to slip a bit and with domestic unemployment rising consumers may become ever more cautious on the high street.

The Dow put in a blindingly boring day yesterday with a 40 point high low range, the lowest range for a full trading day since Capital Spreads opened for business 3 years ago.

The bid for Gallaher is a bold move in what is considered by many to be a fading market. The policies being put in place in Europe can be expected to be spread across the globe eventually and the tobacco industry whilst still in robust good heatlh (if that is not an oxymoron!?) could not be considered, overall, a 'growth' market.

In the FX world the dollar made another attempted comeback which succeeded to some extent against sterling but has stalled versus the Euro and Yen. Buyers of the Yen are in constant evidence amongst our clients as they take any pull back as an opportunity to get in again. The market has given dollar bears quite a few opportunities to get in on the move over the last six or seven trading days with each fall being followed by a reasonable rally. At 114.91-114.93 this morning we are off 40 pips but 114.50 looks like a good support level which may take some data release to get through.

Sterling at 1.9686-1.9689 is bouncing a little from last nights drift lower but even though we have seen such a huge rally over the past weeks there appears to be little impetuous in either direction just at the moment. Dollar bears are moving towards the Euro for the best chance of a break out for the European currencies. Euro is at 1.3313-1.3315 just 50 pips from the highs on Tuesday (sterling is 150 pips from highs) and buyers will be looking for a push to test this level again. Bears (and there are a good few) are focusing on the 1.3265 support level and then the minor 1.3200-1.3265 trading range.

Gold (as commented yesterday) decided to have a look at the 632 support level (which failed) eventually dropping $12 on the day to 630.5 at the close. This morning we are seeing a little 'bottom picking' by clients who remain solidly bullish. Traders will be watching 627 for signs of further weakness which if broken would open the way to the 617 and 613 supports. Current price is 631.2-631.8.

Oil seems to be stuck in the $63 - $64 range testing both ends on Monday Tuesday and Wednesday and we are now right in the middle at 63.39-63.44. A close outside the range mentioned would probably indicate the near term direction to play for. Oil.

Markets are looking firm once more as dealers continue to buy into the equity story. December (unlike November) is not generally known as a trend reversal month and with the overall market condition continuing to be bullish traders are happy to hold on and await events.

Today sees 'Our Gordons' latest budget extravaganza and with 'green issues' once more to the forefront what better way to ensure that the UK continues to pay virtually the highest price for fuel in the world. With public finances almost running out of control any slight slippage in the private sector (who let us remember pay for all of this) would quickly turn the British public debt scenario into a nightmare.

The FTSE is looking to come in a few pips higher on the back of a good close in the US With early calls at 6090-6092. Historically Pre Budget days have been slightly negative so we will probably run into some client index selling before 12.30 (when the chancellor stands up). FTSE traders are also looking at the very strong resistance/support level at 6100 to 6105 which will take a bit of an effort to get through. Failures to breach this (whether on the way down or the way up) have triggered big reaction moves and we could see some fireworks in either direction.

The Dax and US market are completely unchanged overnight with early quotes at 6374-6376 for the German markets and 12328-12332 for the Dow. The S&P hit another new high yesterday moving 6 points up to close at 1415.0 whilst the FTSE remains 150 pips off the peaks of November and the Dax 120 lower.

The reason for this is probably the currency shifts which have not only impacted exporters but have also made equities themselves look expensive to foreign investors. With the FTSE up 10% on the year and Sterling up a further 10% a US investor is looking at a very nice return on his investment.

Today also saw Jarvis come with interims showing a substantial drop in losses from 59m to just 1.5m. With a market cap of only £100m debt levels of £46m on turnover of just £153m the situation is still fraught but the management appear to be making all the right moves. The shares are opening up slightly at 60.50p.

FX markets took some of the pressure off the dollar against Europe and transferred it to the Far East. Whilst Sterling dropped almost a cent the yen rallied 0.5 cent. This appears to be the move today as well with Sterling at 1.9705-1.9708 down 20 pips and the dollar at 114.80-114.82 vs the Yen down 15 pips. It is difficult to give any support or resistance levels at the moment for Sterling as we appear to be in 'blue sky'. If we have seen a medium term high already then the first target would be the previous high at 1.9550 with 1.9190 as the first 'retracement' level.

The Euro is also pausing for breath with dealers starting to take a few profits. 1.3340 appears to be strong resistance on the way up with the currency trading higher on each of the last three days but failing to close above it. Traders are unlikely to be reversing the trend at the moment but as with moves of the past a swift follow through of a sharp move is generally required to hold onto gains. Currently we are off 20 pips at 1.3297-1.3299.

Gold is suffering this morning as dealers worry about the lack of progress given the weakness of the dollar. As mentioned before in Euro and Sterling terms the price has hardly moved over the past few weeks. Today we are $5 lower at 637.6-638.2 back in the 632 to 642 trading range. Support is at 632 and we may see an attack on this at sometime soon if only to confirm the higher prices if the attack fails.

Oil is at 63.61-63.66 for Jan Brent up 35 cents overnight. Oil seems to be at the mercy of US weather forecasts. A bit of cold weather in New York and up we go, a thaw and we will probably slump again.

So finally, after we have been talking about the break out of Sterling for the past week the papers get on the back of it with banner headlines forecasting woe and disaster across the globe if the Greenback moves into a terminal slide.

At least in the UK we have trade deficit (presumably mainly in dollars) which must now, in sterling terms, look alot smaller. Pity the poor chinese who rather inconveniently run a trading surplus. Their reserves (again mainly in the dollar) are now worth only 90% of what they were this time last year.

A bit tongue in cheek but like all 'jokes' with a grain of truth. Dealers are likely to be nervy of corporates whose earnings are dollar related especially if their costs are not. A UK drug manufacturer, for example, who researches and manufactures in the UK but sells in the US. Suddenly his revenue is 10% lower in local currency terms but his costs are fixed. Of course, for this year and maybe next, a prudent finance director would have forward sold projected dollar earnings and thus be sitting on a nice little FX profit to offset the revenue loss but this is finite and eventually it will come out in the wash.

Today the FTSE is likely to open on the strong side after the US put in a solid performance in late activity last night to finish on the side of the angels. When the UK index closed yesterday the S&P was heavily down after the Chicago PMI number came in very much lower than expected, under 50 (normally an indicator of possible economic contraction), at 49.9. Early calls are at 6070-6072 but dealers will be hoping for more after the disappointments of recent days.

The DAX is looking strong as well, although for an economy so geared towards exports, the strength in the Euro may soon be of concern if it continues for too long. Prices as i write are 6340-6342 up 30 points. There is strong resistance at 6366 which may take some battering to get through and on the down side there is even stronger support at around 6275 to 6290.

Currency markets continue to surge and ebb dramatically. Us economic data, which had been very mixed is now starting to fall more frequently into the negative camp and as each succesive release hits the market so the dollar sinks again. As everyone has now made headlines of the problem we will now probably have a reversal over the next couple of days and profit taking appears to be very much the order of the day this morning as Sterling which surged again overnight to a 1.9750 high has now slumped back down to 1.9676-1.9679. At 1.9670 the currency was looking comfortable yesterday evening and will probably find some support at this point.

Gold finally moved higher as the dollar weakened mainly because the weakness was also against far eastern currencies which had not been the case in recent days. For all the moves in the price of Gold in Sterling terms it is under 10% higher than the start of the year and does not therefore look good against equity returns over the same period. This morning we are seeing slight weakness after yesterdays move up at 646.1-646.7 and bulls will be hoping that the dollar weaknes continues as otherwise we could see a sharp sell off.

Capital Spreads Market Commentary

Not surprisingly markets are expected to open a bit higher this morning after the US and Far East managed to put on good performances last night and early this morning. The FTSE and Dax are called up 10 points at 6092-6094 and 6373-6375 in pre-market activity.

It seems that all the indices have rejected the bear move of earlier this week and are now scrambling to make up for the lost value. At this point it is worthwhile remembering why we started to fall (the Dollar weakness and US economic worries) and to remind ourselves that these factors have not yet gone away. US retailers, having reported stoking Thanksgiving sales over the holiday then turned round and indicated that 'eerrr, actually November as a whole is not good'. Combined with this is the seemingly strange situation in the housing market where sales seem to be falling off a cliff whilst at the same time House prices continue to rise. This cannot continue and it is the fears over this section of the US economy that must be salved before further Equity market progress should be expected. If new home sales start to pick up then we can breathe more easily but if house prices start to slip then retail sales will feel the knock on and we could enter a slowing economic situation (breathe the word quietly .. a recession).

This morning sees the dollar weakening again overnight with the GBP/USD (cable) up 80 pips from last nights close at 1.9526-1.9529 and the Euro (again underperforming sterling) up 40 at 1.3185-1.3187. Dealers will be looking for a break of the 1.9550 sterling top recorded earlier this week which also happened to be the same top of the last rally back in December 2004. There was actually a brief (two minute) breakthrough earlier this morning but sellers swiftly shoved the market back down.

Punters will be hoping for more from the yen this morning as the currency appears to finding few friends just at the moment. The central banks indication that it is not looking to raise rates anytime soon gave the yen bears something to get their teeth into and we will be looking to see if the 115.75 support holds in the near term. At 116.09-116.11 this morning we are some ways from this level but with the currency falling, in line with the dollar, to new lows versus the Euro and Pound bulls are finding it difficult to see any light at the end of the tunnel.

As the dollar rose slightly yesterday so Gold slipped lower and is now slightly higher again this morning on the reverse dollar weakness. The problem seems to be that precious metals (as a currency play) seem to be falling further on dollar strength than they are gaining on its weakness. This morning we are up $1 at 637.2-637.8 still in the trading range 632-642.

Oil is back at the top end of its two month trading range at around $63. Bulls will be wary that each attempt to break higher than 63.40 on four occasions over those two months has resulted in failure and a rapid retreat back to around $60. So whilst the plat appears to be to the upside for the moment traders must beware a pull back. Jan Brent is at 62.94-62.99.

The indices all held their support levels yesterday after a concerted attack to the downside on several occasions through the day. Support in the Dax at 6265 was breached but the lower level at 6245 held in a day of fluctuating fortunes where 50 point ranges were traded in five separate periods.

The minor support in the FTSE at 6008 also held (twice) and the market rebounded strongly on both occasions.

The call this morning is for the Dax to open some 25 points higher at 6308-6310 as is the FTSE at 6050-6052. With the currencies looking so strong international investors may not be so keen to get involved in the UK markets especially if the fears over further rate hikes from the MPC continue to swirl. Our clients went home long last night in both the FTSE and Dax and will be relieved by the opening calls but are not likely to hang around for too long if softness threatens during the morning session.

The Dow, when compared to the Europeans, was rather subdued with just a 70 point range on the day but the S&P did manage a spike lower on the 13.30 data release but did eventually manage to close 5 points to the good at 1386.0. This morning sees further buying as the Nikkei climbed 221 points overnight and we are now at 1389.1-1389.5. This level represents the highs of the move in October and early November and may be considered a strong resistance point. If we close above 1390 tonight we could see a return to the Bull momentum that has been somewhat dented in recent sessions.

In the FX markets the sterling bears have been well and truly mauled with yet another triple digit rally yesterday which made for three plus 100 pip moves in just five days (and in fact means that Cable has had eight straight winning days). This almost exactly matched the previous big rally at the end of July which also took us seven cents higher. Clients who were short have now been squeezed out and any remaining longs have, in the main, taken their profits leaving us with a flattish GBP/USD book last night. This morning is seeing a little more selling from customers as traders hunt for any weakness as the cross rate has hit almost the exact same high as December 2004 at 1.9550 and sold off from there. This morning sees the market off 15 pips at 1.9505-1.9508 and we are likely to see some further pull back this morning if 1.9495 is sold through.

The Euro is still struggling to match the pounds strength but is still doing well having rallied 350 pips in the last five sessions. Again we are finding sellers more in evidence this morning as profit taking becomes the order of the day. One of the main reasons for the 'underperformance' of the Euro vs Sterling has been the fact that dealers have been naturally long of the Euro anyway and so without short position holders to attack the momentum gained in the move has been less.

Gold oscillated around throughout yesterday. Yet again failing to take advantage of the Dollar weakness. This lack of follow through may begin to worry punters if we do not break through the $642.0 resistance soon but for the moment bulls are happy to stay long and await events. It has been quite some time since our clients actually went net short of Gold so they have, in general, been on the right side of most of the market move higher.

Oil moved higher yesterday and we are now just below the 61.40 resistance at 61.16-61.21 in the January Brent. The market has now traded in a $5.50 range for almost two months and we appear to be stuck right in the middle of it at the moment.

Dealers have been well and truly caught on the back foot over the past two days. Yesterdays comment to our clients that the market was looking for a pull back to 6270 in the Dax (yesterdays low) and a fall to 5995 in the FTSE fell on deaf ears and we were continually seeing buyers trying to call the lows.

This morning sees markets looking a tad weak once more with early buying in Europe being hit on the open of the FTSE as sellers of the 100 index dragged the other indices lower.

The FTSE is now at 6010-12 and we are likely to see a base appear for the short term as dealers will not be willing to sell towards the 6000 level. As the currency markets send the dollar to new lows versus the Pound and Euro traders are increasingly worried about the trade effects on industry and services. Much of the worlds business is transacted in USD (not just buying and selling of widgets but also of financial services and 'invisibles') so a fall in the Greenback will affect net revenues for a large host of companies.

Most of the indices are now sitting on or a little above significant support levels so traders will be putting on tentative bullish trades with close stops.

In the FX markets the Pound continues to power ahead outstripping the Euro in dollar gains. This is probably due to the fact that there are more sterling shorts set up above the 1.90 levels than in the Euro. Traders have been long the Euro for quite sometime so there is less of a follow-through potential from shorts being forced out of positions than is the case with the pound. AT 1.9440-1.9443 we are seeing a little tiredness creeping in and our clients are cautiously cutting longs and maybe putting on the odd small short. The UK has pretty much the same economic problems as the US but from a high tax situation rather than the low one in the states.

The Yen seems to be missing out on the move at the moment after the breach of the 117.40 level last week and the market does not seem to want to push below 115.75. This morning is seeing yen sellers (!) and the EUR/JPY and GBP/JPY are at new highs again. At 116.18-116.20 we are running out of time for the dollar bears and the Yen could have further trouble ahead.

Gold failed to break and close above 642 yesterday and even though the dollar is still weak sellers are creeping in to the metals. Gold is off $3 this morning at 637.9-638.5 still well with the current trading range but traders will be disappointed by the reaction.

ODL moves into spread betting

Broker ODL is to establish an FX spread-betting operation to target UK consumers early next year, the company said.

The broker is currently beta testing the new operation that will go live in the first quarter of 2007, said Alex McKinnon, head of FX. He said the platform will enable betting on 82 currency and precious metal pairs. The platform will also enable spread betting on commodities and major indexes such as Nasdaq and the FTSE 350. Customers will be able to trade on all different asset classes with a single login.

The company is setting up the operation with three hires it made from rival spread-betting firm City Index in the summer. Duncan Anderson and James Parker joined ODL in July, and Jason Gibson joined in September.

Anderson said the company would initially target existing ODL clients with a soft launch in February, with the platform opening to the wider public in March. He added that the platform would benefit from growing retail interest in FX trading. "Volumes have been up across the board and from a retail perspective they have really been pushing on."

GFT opens London office

GFT Global Markets, a new division of US firm Global Futures & Forex, has opened a London office offering spot FX, spread betting and contracts for differences.

The office will target active traders, hedge funds and institutions in Europe, Australia, Asia and the Middle East.

Ted Frith has been named director of sales for the London company. Frith's career includes a spell as head of FX sales at Dresdner Kleinwort Wasserstein.

GFT Global Markets is the sister firm of the US forex trading firm, Global Forex Trading (GFT), and is run by Gary Tilkin, founder and chief executive officer of GFT.

Tilkin will lead GFT Markets, in addition to a handpicked management team of forex dealing staff and other areas of finance.

Earlier this year, GFT was granted a licence from the Financial Services Agency of Japan, allowing the firm to offer forex-margin trading to Japanese investors.

Barclays Stockbrokers launches spread betting service

Barclays Stockbrokers has launched a financial spread-betting service for retail investors to trade on upwards and downwards movements in share prices.

The retail stockbroking arm of Barclays Bank says it has launched the service in response to research which shows that 40% of its customer base are currently using or plan to use a financial spread trading service.

The service offers investors the facility to speculate on the direction of future price movements of various underlying financial instruments including indices, currencies, commodities, equities and their associated options - by indicating the amount they wish to bet on each point movement.

The bank is promising fully interactive online dealing and instant execution, with guaranteed stop loss orders and a minimum stake size of £3 per point.

Barclays says it will complement the service with the forthcoming launch of a 'Professional Trader Platform', feautring an integrated suite of expert-grade financial tools designed to help traders to predict and analyse market movements. The service provides free level two data for investors that trade on average more than seventy five times in a calendar quarter.

Capital Spreads Market Commentary

UK indices fell out of favour yesterday with Markets drifting lower against little move in the Dax or the Holiday trading in the US. The FTSE is called 5 lower at 6133-6135 on the open this morning but it looks like catching up a little on the other Indices as the Dax is coming in off 15 and the Dow off 18.

With most US traders tacking a long weekend break over the thanksgiving period volumes are likely to be low again but they may end up kicking themselves as the opportunity to take advantage of a possible break out or market reversal may be missed. The US markets are having one of their regular pauses at the moment. The rally over the past six months has taken the form of a series of steps with traders happy to pause for breath after every move higher. These breaks have tended to take between 5 and 10 trading days but the latest one is distinguishable by it restricted trading ranges. The last five trading days have had ranges of just 60 points and the closing prices have deviated by just 13 points. This type of constrictive activity normally portends a sharp break out one way or the other. The Dow is called at 12311-12317 this morning.

The FX crosses are definitely exploring new territory with Cable at new highs for the year at 1.9180-83 and the Euro pushing hard at the massive 1.2980 resistance level. The Euro has had two looks at this price this year (back in May) and both times rejected the levels decisively. This time is slightly different in that yesterday the market actually managed to close above 1.2920 which it failed to do on the last moves higher. Traders are long and looking for further moves above 1.30 and possibly back up to 1.3130 and then 1.3475. This morning sees the Euro up 25 pips at 1.2965-67.

The Yen appears to have run into something of a support level on the dollar at 116.05 the low yesterday which was also the significant support level in September and July. A close below 115.75 would confirm the bull run for the Yen and buyers of the dollar have set stops around this level. Yen this morning is unchanged at 116.28-116.30.

Gold is reacting to the dollar weakness and slowly grinding higher but the moves appear to lack conviction and our clients are slowly closing longs as we drift up. At 631.2-631.8 we are at the top of the current trading range a close above here tonight would indicate a move into the 632-644 range.

A very disappointing day yesterday with all the optimism of the morning gradually draining out of the UK markets. It is very unusual for the FTSE 100 to actually move significantly in the opposite direction to the Dax but yesterday we managed a drop of 40 plus points whilst the german index rose 15. Whilst the FTSE does generally move in the same direction as the Dax the UK index has severely underperformed its European counterparts since mid June. At that time the Dax was some 250 points under the FTSE but is now 330 higher and this is at the same time as UK plc is apparently being bought by all and sundry. No wonder, from a European perspective the UK must look very cheap at the moment.

Early calls on the FTSE were for a move some 15 to 20 higher but this ran into solid selling and we will have to be wary that with the US on holiday today and, in practice, tomorrow the market does not get into a selling pattern that generates its own momentum to the downside. The quote is now 6155.-6157 down 4 points and our clients are getting out of a few longer term long positions. With the US off today it will be difficult for volume traders to get any enthusiasm but we may find that the markets will go a 'stop hunting' mission.

The FX markets finally broke out of their trading ranges yesterday. Unbelievably I actually mentioned the triggers in yesterday's comment and they performed exactly as they should ( a chartists dream). The Yen broke through 117.40 and then sold off, The Euro broke through 1.2880 and surged higher and the Pound went through 1.9060 and 1.9080. Our FX desk actually had a quiet day! Which indicated that clients were either in the right positions and running them or that they felt they had missed the move and were keeping their powder dry.

Today is likely to be one of the quietest of the year as without the New York FX traders it will be difficult for momentum to build up. The Yen still looks strong as dollar longs are getting squeezed but in truth all the majors are comfortable at their new levels against the Greenback. If the markets can hold to these levels for a few days then we should see further dollar weakness in the run up to Christmas.

Gold performed quite badly considering the dollar weakness (generally a falling dollar means a rising Gold price) and traders may be worried about near term future gains. Initially gold rallied strongly on the dollar move, reaching 634.5, but sellers then appeared throughout the afternoon and evening to take us back to virtually unchanged (which is where we are this morning) at 629.0-629.6.

Oil was badly hit by the inventory numbers (last weeks numbers were weak this week, strong) and at one point fell over 150 cents in 20 minutes. Sellers are quick to exploit any downturn and bulls continue to need quick feet to limit losses on sharp falls. This morning we are slipping slowly and are now down 30 at 59.20-59.25.

With the Americans on holiday from tomorrow buyers are out in force this morning looking to get those last pre-thanksgiving bargains. With the Nikkei rebounding a percent overnight, private equity acquisition deals by the truck load and with ICI getting a truly stellar price for it's Givaudan unit the news appears all to the good this morning. DSG international announced better than expected sales growth but profit taking is likely to be the order of the day in early trading.

The FTSE is coming in 30 points higher on a combination of the above, on the Oil price driving over $60 once more and on Gold pushing up towards $630. Mining stocks have had their usual knee jerk reaction to the metals price and they are helping to drag the index solidly into the mid 6200's. Early calls are at 6231-33 and clients are long and 'singing'.

The Dax has got in on the act as well at 6484-6486 up 25 points but the Dow and S&P seem to be a bit laggard only drifting a view pips up on yesterday's non-event.

Yesterday was a truly dreadful trading volume day with virtually no movement anywhere. With no economic data and a major US holiday on the horizon dealers felt no inclination to do anything. The problem with the US thanksgiving/independence holidays is that, yes, they are normally dreadfully dull. But, on occasion with the lack of liquidity caused by dealers taking the day off we get huge moves one way or the other as small trades trigger bigger stops which then trigger the next set and so on.

The Dollar is looking a tad weak this morning with longs liquidating positions. Cable is over 1.90 again at 1.9044-1.9047 up 45 pips. The next resistance is 1.9060 and then 1.9080 whilst support is down below 1.90 at 1.8985. The Euro is above the 1.2850 level at 1.2866-68 but we need to close here at least and preferably above 1.2890 to break the resistance. Heavy sellers are likely to appear if the overnight move does not get some follow through buying later today. Dealers are gritting their teeth against the cost of carry in the USD/JPY cross and are selling the dollar quite heavily. At 117.39-117.41 we are off 40 pips this morning and a long way from the highs of yesterday at 118.25. The currency is bang on the medium term trend line support and a break of this could see a solid drop into the low 116's.

As mentioned yesterday Oil was looking strong and it did not disappoint with a nice 150 cent plus rally up to 60.50. Our clients ran their longs all day with a little profit taking as we rose. Today sees a small sell reaction with the price for Brent Jan dropping back to 60.21-60.26 but we have the oil inventory numbers this afternoon which will probably be the major definer as to the direction over the short term. As mentioned Gold had a good day of it moving up $7 to 629. The market is now at resistance levels and will need another push to get us higher. The weaker dollar could be a trigger for buyers but it appears very quiet in early action. Rolling Gold is unchanged at 628.5-629.1.

Another rather strange day as the FTSE struggled to hold its head above water. All the indices opened weak after the Nikkei 360 point fall but as the day progressed more and more buyers came into the market forcing us into positive territory. The Dax having been 40 down at one point ended 30 up but the FTSE was unable to overcome the overhanging fear in the Oil and Mining sectors and still ended on a weak note.

This morning the call is for un