UK
The FTSE-100 gained ground for the second consecutive week as investors took the view that the situation in Ukraine (and Crimea) had stabilised somewhat, and that it was appropriate to focus more on UK corporate results (which have been slightly better than expected, broadly speaking).
The index ended the week with a rise of 0.89% and, this price action confirms that the long-term uptrend continues to offer sold support for this market. With just trading session of the first quarter remaining the FTSE is down by 2% for the year, although it is worth noting that there is very little correlation between Q1 performance and what happens over the year as a whole.
Of greater interest at this point is whether the index will be able to advance for the third week in a row – for only the second time since October.
FTSE 350 Banking Index spent most of the last 12 months trading above key support at 4,600 or so, which means that it was a fairly significant technical event when that level was breached earlier this month. In fact, it traded down to 4,349 before it began to find support again and although it is starting to look like a bottom of sorts has formed down there the 'bounce' to date has been pretty unconvincing. We really need to see a close above the recent intermediate peak, at 4,469, to confirm that the worst is over for the banking sector.
US
Dow Jones Industrials traded through a narrow range last week, posting a low of 16,191.79 and a high of 16,466.04, and its minor 14-point loss was consistent with this cautious price action.
Investors appear to be unwilling to commit further funds to equities at the moment – this probably has something to do with the situation in Ukraine, although the latest pronouncements from the Fed have made it pretty clear that its bond purchases will end later this year and that interest rates will begin to rise shortly thereafter, meaning that the era of 'easy money' is now within sight.
All the same, the Dow's uptrend remains very much intact and there is little in the current technical picture to suggest that now is the time to sell.
Japan
The Nikkei 225 continues to trade in a volatile manner and last week's 3.23% advance lifted it off the lows, reinforcing the impression that there is plenty of interest when it looks like it is getting close to 14,000. Further near-term upside now actually looks possible for the Tokyo index and a push back up to around 15,250 looks possible before the sellers are tempted back in again.
Europe
The Euro Stoxx 50 rose strongly for the second week in a row and its 2.45% gain was notable for the fact that it lifted the index through the upper end of its recent range and to its highest closing level since 2008.
The good news for traders is that this strength has not left it looking particularly overbought and the current technical outlook is suggesting that the Stoxx should be able to consolidate its break through resistance and push higher still in the near term.
Commodities
Gold – the retreat from the recent top, at $1,381.74, continues apace and last week's 3.02% decline has also served to confirm that the short-term uptrend has also been breached (as well as the 50-day moving average).
This persistent weakness has left gold looking more oversold than at any point since December and although it closed above the lows last week there is still little in the way of compelling evidence that a bottom is forming. That said, the sell-off does appear to be losing momentum and a push back above $1,320 or so would give the impression that the lows were in.
Copper – over the last few weeks the copper price has dropped back to test a major support level in the region of $3 and it is interesting to note, therefore, that it put on a fraction over 2% last week. That looks like a direct consequence of that support being successfully tested, and while that is undoubtedly a positive development, traders are probably going to want to see further upside this week before they are persuaded to jump back in.
Brent Crude continues to trade in a cautious manner and although it added just over 1% last week there is little in the chart to suggest that a break higher has become imminent. In fact, the outlook remains uncertain and it is hard to believe that the current glut on world markets will not drive the price lower before long.
Bill McNamara is a technical analyst at Charles Stanley
