Sie sind auf Seite 1von 5

13th October 2011

UPDATE

Technical Fundamental

The Gilt bulls remain intact but cautious

in association with

Disclaimer

Authorised and regulated by the FSA

The Gilt bulls remain intact but cautious


Long Gilt Continuous 141 140 139 138 137 136 135 134 133 132 131 130 129 128 127 126 125 124 123 122 121 120 119 118 117 116 115 114
113.34 Low

WEEKLY CHART
The markets medium-term chart remains unmistakably bullish. But the integrity of that bull structure is being tested. The core pattern is the large continuation Triangle formed since the beginning of 2009. Such is the size of that pattern that any short-term re-penetration needs time to prove that the structure has failed. Nonetheless, the pull back through the upper diagonal of the triangle needs careful watching. In that context, the support from the band of prior Highs 125.58-126.93 is a good test of the strength of the market.

in association with
High 126.93 125.58 High

UPDATE Technical Fundamental

113 112 111 110 109 108 107 106 105 104 103 102

O N

D 2009

M A

D 2010

M A

S O

N D 2011

M A

M J

S O

N D

Long G ilt Dec 11

133.0 132.5

131.50 High

132.0

131.5 131.0

129.60 High

130.5

130.0

DAILY CHART
The sharp pullback to the mediumtern horizontal support 126.93 is showing signs of finding support there. But the small triple top is unmistakable. And bulls should watch for the market to overcome the resistance at 128.44-56 before getting confident.

129.5

129.0

128.5

128.44

128.56 128.51
128.0

127.5

127.0

High from August 2010 (126.93)

126.5

126.0

125.5

125.0

124.5

124.73 High
124.0 350000 300000 250000 200000 150000 100000 50000 0

Disclaimer

13

20

27

4 July

11

18

25

1 8 August

15

22

29

5 September

12

19

26

3 10 October

17

24

The Gilt bulls remain intact but cautious

FUNDAMENTALS:
in association with

The protracted rally in the Gilt has paused over recent weeks as the market suffered a correction, but with the Bank of England starting QE2 is the Gilts failure to rally bearish or are there other forces at work? The Gilt, like most other Bond markets, enjoyed a sustained rally driven by fears generated by the Eurozone sovereign debt crisis. As the Euro zone leaders tried and serially failed to get to grips with the root cause of the problem, equity markets sold off hard, sending the Euro lower against the Dollar and propelling Bonds higher. The Gilt stood out as a buy as the UK government pushed ahead with its austerity program, in an effort to bring public spending under control and avoid a fate similar to the one gripping the Euro zone : loss of confidence and slashed credit ratings. However, the Eurozone bought itself some time recently and breathing space when the leaders of the Bloc announced their intention to recapitalise the zones banks, dealing with a parallel fear that they were under-capitalised and sitting on undeclared bad debts which made them highly vulnerable to sovereign default and a fragmentation of the Euro area. The reaction in markets has been clear cut: 1. Equity markets up, 2. The Euro up, and 3. Bonds, including the Gilt, down.

UPDATE Technical Fundamental

The Gilt bulls remain intact but cautious

FUNDAMENTALS: CONTINUED
in association with

We judge the forces that originally propelled bonds higher are still in play. The focus on recapitalising the Banks is essentially a side issue. The core of the problem is sovereign solvency and the lack of political will among Eurozone policymakers to take the necessary difficult decisions to tackle it.

UPDATE Technical Fundamental

But after almost two years of crisis markets reacted have so positively because they hope policymakers were at last getting serious. However, the banks are none too happy about being told to acquire more capital. The reaction from some bankers has been that they would rather shrink their balance sheets by disposing of assets to make their current capital levels adequate. That would be very unhelpful to the Eurozone. The Eurozone looks on the brink of recession: if banks shrink their balance sheets, there would be less credit available and that would make a recession more likely. Meanwhile what of the Gilt? Although not part of the Eurozone, the Gilt isnt detached from its influences, and as equity markets have rallied on Eurozone generated optimism, all government bond markets including the Gilt have sold off. The big question now is can the Eurozone solve its crisis? If not, then equity markets will sell off and bond markets will rally, including the Gilt. And in such an environment, the Gilt would probably outperform as the Bank of England implements its QE policy to the tune of 75Bn.

in association with

UPDATE Technical Fundamental

SEVEN DAYS AHEAD Authorised and Regulated by the FSA 124 REGENTS PARK ROAD LONDON NW18XL TEL +44 (0) 7849 922573 E-MAIL msturdy@sevendaysahead.com, pallwright@sevendaysahead.com WEB SITE SEVENDAYSAHEAD.COM
The material and information set out in this research is not intended to be a quote of an offer to buy or sell any financial products. Any expression of opinion is based on sources believed to be reasonably reliable but is not guaranteed as to accuracy or completeness. The material and information herein is general and for informational purposes only. Although Seven Days Ahead endeavours to provide useful information they make no guarantee as to the accuracy or reliability of the research. The derivative market comprises volatility and considerable risks. To the maximum extent permitted by law no responsibility or liability can be accepted by Seven Days Ahead, any company or employee within its group for any action taken as a result of the information contained in this presentation. You are requested not to rely on any representation in this research and to seek specific advice from your accountant, legal adviser or financial services adviser when dealing with specific circumstances.

Seven Days Ahead is regulated by the UK Financial Services Authority.

Das könnte Ihnen auch gefallen