FTSE falls 12 points in choppy but flat session

The FTSE 100 lost a meagre 12 points to curb a four-day winning streak in what was a quiet end to the trading week, with the UK Index bouncing between a tight range on the day of just 30 points.

Sluggish manufacturing data out of China kept mining and oil stocks weaker on the day, and this is where much of the FTSE’s drag was dictated from, whilst another positive session for UK banks saw the FTSE 350 banking sector post a week’s gain of a hugely impressive 17%.

Vedanta Resources, ICAP and Aviva were the top FTSE 100 stock performers on the day, rallying between 2% and 4%, whilst Weir Group and Petrofac saw the biggest losses, falling 6% and 4% respectively.

Previous Commentary: Markets take a breather after recent gains

20/01/2012 (10.30am)

After seeing strong gains this week, stock indices are showing signs today of some exhaustion.

It is possible that if the indices close in negative territory today this could set-up a minor pullback into next week. This is an opportunity to potentially capture the next leg to the upside but may also set the stage for a decline that could last slightly longer.

What is important is that coming into next week the indices do not decline sharply and eradicate the recent gains.

The FTSE 100 Index has so far remained above 5600, which is a positive sign that could lift the index higher towards the 5820 target. As long as the FTSE maintains a hold of this level the bulls are likely to remain in control. If the index does start trading below 5600, the next line of support could come in at 5585 – 5535 and possibly as low as 5487. These areas could then see another move higher to clear 5820 and ultimately aim for the 6000 level.

So far the German Dax has shown strength above 6200 and is also clearing past 6300 to test the October high of 6430. As long as we see the index remain above 6300, the resistance level of 6440 could see the Dax struggle and pull the Dax down towards the 6300 area. Once the index clears past 6440 the next target becomes 6720. This could prevent the index moving higher before seeing a significant correction. For now though the focus should be between the range of 6300 – 6440.

Heading into the afternoon session, the US Dow Jones should see mixed trading as it takes its cue from the European markets. The Dow should attempt to trade above 12592 otherwise the index may see a drop towards 12563 for an attempt at support. Below this level the index could struggle into the close to catch some gains. If the mood changes from negative to positive the index may seek to take out 12625 level and reach for 12670 today. Into next week, it is important for the Dow to hold onto 12450 to ensure that positive momentum continues over the weeks to come.

Gold prices have recouped losses at the start of this week and managed to get back above the $1600 level. Once the metal clears $16880 we could see gold reach for $1730 – $1780 into next week’s trading session.