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Market Outlook: Auditors on the rack

Feasting on a carcass
February 13, 2018

City AM reports today that UK MPs, working on a joint select committee looking into the failure of Carillion, said auditing firms were ‘feasting on what was soon to become a carcass’ and this image ‘will not be lost on decent citizens’.  Frank Filed, work & pensions committee member said, PwC had ‘managed to play all three sides’ doing auditing, advising on pensions, and acting as special manager in the liquidation of Carillion.  Over at KPMG, the Financial Times reports that the value of public sector contracts awarded fell by 80 per cent since 2015, scandals surrounding the Gupta family getting the ball rolling.

Transport for London yesterday dropped a £1 billion bomb of a deficit caused by fare revenues which are currently well below expectations and forecasts.  Not only are passenger numbers down (despite record employment), but the number of journeys undertaken has fallen; government funding has also been reduced.  Meanwhile the Santander cycle scheme, which was extended to Brixton yesterday, saw a record 10.4 million hires in 2017 and this January was its busiest on record.  Leaner and greener transport?   

DAX 30

Desperately trying to hold above the trend line from 2016’s low and marginally less oversold in the process.  The trouble is that triangle consolidation looks to be part of an inverted pennant chart pattern which, on a break below its bottom edge at about 12000, has very big, fast bearish measured targets.

 

SHORT TERM TRADER:  Small short at 12535; stop well above 12600.  Target 11700.

 

POSITION TAKER:  Short at 12650; stop above 12800.  First target 12050, then probably more.

FTSE 100

Breaking immediate very steep trend line resistance by inching sideways and stuck below what had been first horizontal support at 7200 and above the more important 7100 despite being oversold.  The rally from Tuesday’s low is not a proper bounce.

 

SHORT TERM TRADER:   New tiny short at 7180; stop well above 7300.  Target 7000.

 

POSITION TAKER:  Small short and looking to re-sell as close to 7300 as I think I can get for a drop to the 6675 area.

S&P 500

No longer oversold as prices consolidate between what had been trend line support from an interim low in 2017 and above 2016’s low point.  Rather like FTSE 100 price action since the slump might be an inverted pennant.

 

SHORT TERM TRADER:  New short at 2660; stop well above 2700.  Target 2550.

 

POSITION TAKER:  Short and sold some more this morning for another drop to 2455 – and maybe a lot more.

BRITISH POUND/US DOLLAR

Holding Fibonacci 61 per cent retracement support and the commodity channel index is trying to turn bullish.  Note that dollar/yen today has broken below 108.00, trading almost at its lowest level since November 2016.

 

SHORT TERM TRADER:  Square.

 

POSITION TAKER:  Long at 1.3930; stop well below 1.3800.  First target 1.4275, then 1.4650.

EURO/US DOLLAR

The euro must have more underlying bullish momentum than we had thought as the commodity channel index has not dipped below -100 as it did over Christmas.

 

SHORT TERM TRADER:  Small long at 1.2265; stop well below 1.2200.  Target 1.2500.

 

POSITION TAKER:  Square.

GOLD

The small bounce from Fibonacci retracement support at 1316 has erased most bearish momentum.

                            

SHORT TERM TRADER:  Small short at 1335; stop above 1347.  Target 1280.

 

POSITION TAKER:  Short at 1330; stop above 1350.  Target 1250.

Nicole Elliott is a long-standing Member of the Society of Technical Analysts and has taken over the IC’s trading coverage.  She is regularly interviewed and quoted by the financial media, is a conference speaker, and author of several books on charting.