Few could deny the exuberance of the Short Sterling market – now well above the long- run all-time-highs from February and May this year - they will surely be good support and help ratchet the market better again.

Now contrast that with the DEC11 chart…

WEEKLY CHART DEC11 SHORT STERLING

See how further down the futures curve the current price is far below the highs of Feb this Year.

The market is languishing bearishly rather than making new highs.

Now look still further along the yield curve - at the Gilt chart.

WEEKY CHART UK GILT

In February this year the market re-tested the High established in 2003 around 124.

Thereafter it fell.

So far it has found support at the 116.08 level.

But notice that there has been no bounce from there.

The market is yet more bearish than the DEC11 Short Sterling.

The yield curve is steep and looks set to steepen. Bears should look along the futures strip (and beyond) to establish positions while bulls should buy as close to the Spot Month as possible.

Mark Sturdy
Philip Allwright

Seven Days Ahead
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Mark Sturdy, John Lewis & Philip Allwright, write exclusively for Seven Days Ahead a regulated financial advisor selling professional-level technical and macro analysis and high-performing trade recommendations with detailed risk control for banks, hedge funds, and expert private investors around the world. Check out our subscriptions.

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