Guidance, Correction, Growth, Revival - No boring summer - Accendo Markets Weekly Roundup - 9 Aug 2013

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Mike van Dulken, Head of Research at Accendo Markets, commented in his Weekly Roundup to clients;


A tough week for the FTSE 100 index, giving up 200 points high-to-low to revisit the lower end of its summer trading range. Markets continued to fret over the prospect of less Fed stimulus and have immediately questioned the forward guidance provided by the new BoE governor Carney – the UK base rate to stay low until unemployment falls below 7% – after he included several caveats providing him with plenty of wriggle room on timing, much like his US peer has done with his own QE3 timetable. Markets still clearly addicted to loose monetary policy, needing much convincing of economic recovery before believing stimulus withdrawal won’t hurt.

Big % movers this week* were Aggreko (AGK; +7.8%), as it recovered from more than a 10% fall following first half results on 1 Aug. Aviva (AV; +6.9%) rallied yesterday after H1 results beat market expectations. Anglo American (AAL; +4.3%) has gained on Chinese trade data supporting economic recovery hopes and thus metals prices as well as peer Rio Tinto’s (RIO) positive results. Old Mutual (OML +3.8%) benefited from increased fund inflows and solid US performance while Intertek (ITRK; +3.8%) was helped by a broker upgrade following H1 results last week although gains were slowed up by a 12-month trendline of intersecting support/resistance. *intraday perf

At the unloved end of the index*, Admiral (ADM; -8.2%) fell on dividend fears after peer Esure (ESUR) disappointed with less profits distribution to shareholders. HSBC (HSBA; -5.7%) failed near again 3.5yr highs after H1 profits missed expectations and the bank took more provisions. Standard Life (SL.; -5.2%) suffered from a decline in profits though it did find some support via a trendline of rising lows and the 200-day moving average. easyJet (EZJ; -4.4%) encountered from another bout of profit within its long term uptrend, having made new all-time highs and announcing a slip in load factor within its traffic stats. Schroders (SDR; -4.2%) disappointed in terms of assets-under-management *intraday perf

From a technical standpoint the FTSE 100 registered its strongest weekly move since early July. Back then it was a rally, taking the index back to  6-week highs. This week it was a 3.5% correction after a brief foray above the summer sideways consolidation highs. As I write, the index has already started perking up into the week-end (+60pts today), getting back above the 6560 level that gave way on Wednesday and the trendline of falling highs from last Friday at 6575. If these can revert to support, the 6660 level (resistance for much of July) could be regained followed by the 6715 summer highs from which we fell this week. Chinese data already helping out, and its Japan’s turn on Monday.

After all the talk of a slow summer sideways consolidation of the 10% gains from end-June, was it in fact delivered later and more sharply via a proper correction? Could this be what was needed to revive the longer-term uptrend? Could August turn out to be a more interesting month than typically with attractive volatility early on followed by a return of momentum (two things short term traders seek out). Will a second wind and strong rally to the May high (itself shy of 1999 all-time highs) allow us to challenge the old adage ‘Sell in May and go away’?  And even if you’ve a bullish bias and the downtrend does persist, that’s fine too. Just turn your screen upside down and carry on as you were.

As always – have a great weekend. Let’s keep making the most of what may become referred to as the glorious summer of 2013.

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