World Financial Markets under Pressure

World Financial Markets under Pressure

World Financial Markets under Pressure

The old saying of 'Sell in May and go away' has rarely seemed quite so appropriate as in the current climate.

The markets are certainly spooked at the moment but this does not get away from the fact that a double-dip recession, predicted by a number of commentators, is still unlikely. The key numbers are not yet recessionary. They are just not so glowing as previous indicators might have led us to believe.

Irrespective of the various view points, it is unwise to stand in the way of the stream train ploughing its way through the world's stock markets. The FTSE 100 and many other indices look prone to incessant falls.

As with all bear markets, investors must beware 'the bounce'. The Financial Spreads, 'FTSE 100 Futures' market recently fell for nine consecutive days, the longest losing streak since January 2003. That is the sort of fall that is likely to bring out the bottom-pickers who are on the lookout for bargains. Although it would be a brave trader who is willing to put their head above the parapet.

The general trend of the futures and spread betting markets is definitely bearish at the moment. The easier direction to cause a panic would be down, however, there are probably a good number of weak short positions out there. If there is some concerted pressure on these short positions, ie a classic short-squeeze, and that pushes investors to cover their trades we could see a spike higher.

Looking at the Dow Jones Futures, long-term investors will be hoping that the current weakness is just delivering a better level to buy at. Although, before putting in further funds, most speculators will be waiting for an indication that we have reached something of a support area, or perhaps even a recovery scenario.

Elsewhere, apart from Government bonds, all asset classes were under pressure. Even Gold has been failing to benefit from any safe-haven activity. It looks like gold could join the rout as the reasons for buying the metal in times of market stress seem to have finally run out of steam.

Of course, gold has experienced big price falls many times over the last few years. Each time the buyers return to drive the market to new highs. We did bounce off the $1,195 support which held at the start of June 2010 but bears may be targeting $1,170 trend support and possibly even lower towards the $1,040/50 major price support level.

Bulls will naturally be looking for a quick return to levels above $1224 and $1250 to give confidence that the upward momentum is still in place.

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