Where is the economy heading?
The Budget
The budget should have been a forward thinking, bold and must have provided a roadmap of how the UK will survive the recession and come out at the other end. Unfortunately there was very little substance and little or no effort undertaken to help small and medium size businesses.
The key points that stick in my mind are:
UK GDP -1.9
The GDP has confirmed the rate at which the UK economy has shrunk. The only positive news is that the rate of decline has been slower than analysts expected. This does not necessarily mean that the UK will reach the bottom by the end of 2009 as indicated by the government but the decline may not be as harsh as had previously been thought.
Mortgage Approvals
Mortgage approvals figures released indicated that there was a slight increase in March 2009. In reality this is a blip in a downtrend. Leading economists have pridicted that house prices may start rising in 2011/2012 and may only reach figures reached in 2007 by 2015.
Major Indexes
If one were to look at the FTSE100 or Dow Jones Industrial Average it will show that the markets have risen around 30% from the low. This is great news for investors. However the main problem is that the increase has been reached on lower volume, meaning that the indexes have risen due to smaller investors entering the markets. A true recovery can only be confirmed once the volume increase accordingly.
Where is the FTSE100 & DJ30 Heading?
FTSE100 has crossed over the Mid Term Trend Line and is making its way to the Long Term Trend Line. It has come across a lot of resistance at the 200 day SMA(simple moving average). In order for the Bulls to remain in charge there is more likely to be a retracement to the 4125 area then the bulls are likely to attempt to break the 200 SMA. If the market breaks the 200SMA then market will go for the Bull Targets as shown on the chart above. The FTSE is entering a very critical period, as failure to break through the 200 SMA can make the market fall to 2785 level.
If the bulls do break and sustain a rally above the 200 SMA, the market is likely to see institutional investors coming back into the equity market and confirm a possible end to the bear run that had been experienced for almost 2 years.
Dow Jones Industrial Average (DJ30)
The DJ30 has been in a short term uptrend, similar to the FTSE100. From a low of around 6500 it has risen to 8500. The bulls have taken the market through the mid term trend line and through the 50 day SMA. The bulls have also taken out Target 1. The market is likely to retrace encountering resistance on the medium term trend line. For the bulls to remain in control they have to break through the 200 SMA and take out the Target Levels on the graph. Failure to take out the 200 day SMA can result in the market going to the March lows and possibly head towards the 5000 level.
Historically May through to October the markets tend to fall. The degree of the fall can be the key to a full recovery in the markets.
Other useful blogs worth reading
Those of you who are novice traders and are interested in financial markets should take time to view Michael Thompson blog. He works for Worden Brothers and has great insight into using and getting the best from Telechart 2007 charting software. CLICK here for Michael's Blog
The budget should have been a forward thinking, bold and must have provided a roadmap of how the UK will survive the recession and come out at the other end. Unfortunately there was very little substance and little or no effort undertaken to help small and medium size businesses.
The key points that stick in my mind are:
- £2000 to be provided to scrap cars that are over 10 years old. This was meant to help the car industry. Alistair Darlings advisorss must have failed to use the WEB,as a simple search would have shown cars that can be purchased through brokers at much larger discount than £2000 the government is willing to stamp up. The main reason this scheme worked in Germany is due to the way in which cars are purchased. In Germany people pay for cars in full without the need to get finance. As finance is the main bottleneck the £2000 gesture is ill conceived.
- 50% Tax on the 2% high income earners. High earners are vitel for the economy. The entrepreneurs of the country are essential since they provide employment to many people and more importantly are aspirational figures that encourage people to aim higher. This is again a very short sighted decision to divert attention from the crazy levels of borrowing the government have to undertake.
- £600billion borrowing. This is the most serious aspect of the governments failings. The figure is so large its hard to comprehend. This simply means that the UK will be debt for at least 20 to 30 years and future generations will have to pay for this. Unfortunately the media did not highlight the debt crisis instead concentrated on the 50% tax policy for high earners.
UK GDP -1.9
The GDP has confirmed the rate at which the UK economy has shrunk. The only positive news is that the rate of decline has been slower than analysts expected. This does not necessarily mean that the UK will reach the bottom by the end of 2009 as indicated by the government but the decline may not be as harsh as had previously been thought.
Mortgage Approvals
Mortgage approvals figures released indicated that there was a slight increase in March 2009. In reality this is a blip in a downtrend. Leading economists have pridicted that house prices may start rising in 2011/2012 and may only reach figures reached in 2007 by 2015.
Major Indexes
If one were to look at the FTSE100 or Dow Jones Industrial Average it will show that the markets have risen around 30% from the low. This is great news for investors. However the main problem is that the increase has been reached on lower volume, meaning that the indexes have risen due to smaller investors entering the markets. A true recovery can only be confirmed once the volume increase accordingly.
Where is the FTSE100 & DJ30 Heading?
FTSE100 has crossed over the Mid Term Trend Line and is making its way to the Long Term Trend Line. It has come across a lot of resistance at the 200 day SMA(simple moving average). In order for the Bulls to remain in charge there is more likely to be a retracement to the 4125 area then the bulls are likely to attempt to break the 200 SMA. If the market breaks the 200SMA then market will go for the Bull Targets as shown on the chart above. The FTSE is entering a very critical period, as failure to break through the 200 SMA can make the market fall to 2785 level.
If the bulls do break and sustain a rally above the 200 SMA, the market is likely to see institutional investors coming back into the equity market and confirm a possible end to the bear run that had been experienced for almost 2 years.
Dow Jones Industrial Average (DJ30)
The DJ30 has been in a short term uptrend, similar to the FTSE100. From a low of around 6500 it has risen to 8500. The bulls have taken the market through the mid term trend line and through the 50 day SMA. The bulls have also taken out Target 1. The market is likely to retrace encountering resistance on the medium term trend line. For the bulls to remain in control they have to break through the 200 SMA and take out the Target Levels on the graph. Failure to take out the 200 day SMA can result in the market going to the March lows and possibly head towards the 5000 level.
Historically May through to October the markets tend to fall. The degree of the fall can be the key to a full recovery in the markets.
Other useful blogs worth reading
Those of you who are novice traders and are interested in financial markets should take time to view Michael Thompson blog. He works for Worden Brothers and has great insight into using and getting the best from Telechart 2007 charting software. CLICK here for Michael's Blog
Labels: Budget, DJ30, ftse100, GDP, worden brothers
posted by Bull Kicker at
14:40
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