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SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets
Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573E-MAIL [email protected] WWW.SEVENDAYSAHEAD.COM This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sourcesbelieved to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness oraccuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold orheld on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein wereconsidered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,relationship or arrangement in relation to them.
In association with
Market Update 6th January 2011
The changing balance between FTSE and DAX
The Macro Trader’s view:
From early September into mid-December the German DAX enjoyed a strong bull run
supported by a strong economic recovery, which helped pan-Euro zone economic data mask
the plight of many other Euro zone economies that were at best enjoying a modest recovery.
Or, more typically, were gripped by the Sovereign debt crisis that has forced Greece and
Ireland to seek a rescue. And to shelter under promises made by China to keep buying their
Sovereign debt.
The FTSE has rallied too, but the move has been less dynamic. Even though UK Q3 GDP
grew by 0.7%, following an even stronger Q2 GDP report of 1.1% or 4.4% annualised, which is
more than respectable. But unlike the DAX, the FTSE suffered a steep correction throughout
November.
Yet for all that, over recent days the FTSE has pushed higher, just when UK data has begun to
support the fears of many analysts that the UK economy could struggle in 2011. And now, the
DAX is now showing signs of fatigue if not vulnerability even though German data remainsalmost uniformly positive.
For answers to this growing divergence from previous trends we must look beyond the UK and
German economies. In the case of the DAX, the Euro zone economy is under close scrutiny as
the Sovereign debt crisis continues to rumble on. The Germans have turned down requests to
allow the issuance of Pan-Euro zone debt in place of national Euro denominated debt as a
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SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets
Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573E-MAIL [email protected] WWW.SEVENDAYSAHEAD.COM This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sourcesbelieved to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness oraccuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold orheld on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein wereconsidered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,relationship or arrangement in relation to them.
In association with
means of solving the crisis. Moreover they continue to push for hasher terms to be applied toany new bailout requests from failing Euro zone member states.
The story now on many lips in the markets is: can the Euro zone survive at all or in a reduced
state, with or without Germany. Germany seems to think the way forward for the Euro zone is
for all member states to adopt the German export-led, suppressed domestic demand economic
model.
This model may work for Germany since it already has established world-class export
manufacturing industries that fuel growth and allow her to run large trade and current account
surpluses. But what do the majority of the peripheral states have to offer that would allow them
to adopt this economic model? We think very little and the result would be years of deflation
and austerity.
But what of the FTSE? The UK is implementing one of the most severe austerity programs
ever, with public spending slashed and VAT hiked. So severe is this program that there are
real fears the economy will not be able to cope, but this environment isn’t retarding the FTSE .
Why?
Over recent weeks the US economy has begun to publish strengthening data, and many now
judge the US economy is about to emerge from the long period of economic under
performance that forced the Fed to start a QE2 policy and Obama to agree to an extension of
the Bush tax cuts.
The result could prove dramatic. If the US economy can join the Chinese and Indian
economies and start to experience strong growth, demand for raw materials and energy will
move up to a level never before witnessed. That is because this would be the first economic
cycle where the US has two new large nearly-emerged economic powerhouses competing for
market share.
Over many years has evolved from being a parochial stock exchange to an international
market place where many foreign companies seek either a primary or secondary listing. This is
the advantage the FTSE has over the DAX. Consequently, as demand grows internationally for
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SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets
Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573E-MAIL [email protected] WWW.SEVENDAYSAHEAD.COM This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sourcesbelieved to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness oraccuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold orheld on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein wereconsidered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,relationship or arrangement in relation to them.
In association with
energy, raw materials and commodities of all types, the companies that supply them will seetheir equity in demand and this will help underpin the strength of the FTSE.
This year then could well see the FTSE outperform the DAX even though the UK economy
may underperform her German counterpart.
The Technical Trader’s view:
A M J J A S O N D 2008 A M J J A S O N D 2009 A M J J A S O N D 2010 A M J J A S O N D 2011
3000
3500
4000
4500
5000
5500
6000
6500
7000
7500
8000
8500
9000
9500
10000
10500
11000
11500
38.2%
161.8% 61.8%
261.8%
6802 High
5796 HIgh 5892.50 High
FTSE 100 Index LIFFE Continuous
FTSE MONTHLY CHART
The FTSE is very well set-
up.
A large Head and
Shoulders pattern has
completed and looks to be
driving the market better –
as far as 8500 or so.
In the short and medium-
term too, the price action is
compelling for the bulls -
see how the market has
overcome both the Prior
Highs at 5796 and 5893. (
and a Fibonacciresistance) Both these
Highs will be powerfully
supportive on any pull-
backs
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SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets
Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573E-MAIL [email protected] WWW.SEVENDAYSAHEAD.COM This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sourcesbelieved to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness oraccuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold orheld on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein wereconsidered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,relationship or arrangement in relation to them.
In association with
M J J A S O N D 2008 A M J J A S O N D 2009 A M J J A S O N D 2010 A M J J A S O N D 2011 M
20000x10
3500
4000
4500
5000
5500
6000
6500
7000
7500
8000
8500
61.8%6347,59,91
Low 7220.50 Resistance
DAX Index Continuous
DAX WEEKLY CHART
In many respects the DAX
has been ahead of the 2009
rally in the FTSE, having
overcome the same 61.8%
retracement resistance
weeks earlier, but the clear
over head price action
resistance and resistance
from the Prior low at
7220.50 is a warning to theDax bulls.
Also, there is no equivalent
underpinning to the H&S
reversal pattern in the
FTSE.
Comparing the short-term
price action between the
markets is even more
intriguing.
26 2 9
August
16 2 3 30 6 13
September
20 2 7 4 11
October
18 25 1 8 15
November
22 29 6 13
December
20 2 7 3 10
2011
17
50000
100000
150000
5750
5800
5850
5900
5950
6000
6050
6100
6150
6200
6250
63006350
6400
6450
6500
6550
6600
6650
6700
6750
6800
6850
6900
6950
7000
7050
7100
7150
7200
7250
7300
73507400
6919.50 High
6700 High
Prior High support 6409
Prior High support 6360
Prior Low resistance 7220.50
(August 2007)
High 7105.50
DAXI ndex Mar 11
DAX DAILY CHART
The sideways price action
throughout December is
clear and notable.
The drift has taken the
market back to the support
from the Prior High in Late
November ….
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SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets
Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573E-MAIL [email protected] WWW.SEVENDAYSAHEAD.COM This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sourcesbelieved to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness oraccuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold orheld on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein wereconsidered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,relationship or arrangement in relation to them
In association with
26 2 9
August
16 23 30 6 13
September
20 27 4 11
October
18 25 1 8 15
November
22 29 6 13
December
20 27 3 10
2011
17
50000
100000
150000
200000
5350
5400
5450
5500
5550
5600
5650
5700
5750
5800
5850
5900
5950
6000
6050
Prior High 5653
5846 High
5482 Low
5810
5872 High
5796.50 High from April 2010
5983.50 High
FTSE 100 Index Mar 11
FTSE DAILY CHART
But the FTSE is a great deal
higher than it was in early
December, bouncing from
the support of Prior Highs in
the manner of a well-
constructed bull trend.
Mark Sturdy
John Lewis
Seven Days Ahead
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