-London Leads the Way-

Although this has been a very quiet week from a trading perspective, what has been noticeable is that the FTSE 100 index has begun to show an edge to the other major indices in performance terms.

This can most easily be seen when comparing each market's reaction from the June 13th lows, which was the trough of the falls that began just one month earlier. Almost all the big indices have retraced 50% or less of the short term bear market, and until the respective barriers are overcome, one might look for another downward move to retest lower levels of support in the next few weeks. But this is not the case for the FTSE 100 index.

Our target for FTSE, as you will recall from our previous notes, was a move back up to 5800, a level which represented both a 50% retracement of the big fall and two previous rally peaks. This has been exceeded this week (FTSE is at 5877 as we write) and provided the index can stay above the 5800 area, we can project another move towards 6000, at which point it would be much harder to make progress. This level or thereabouts would probably set the scene for an excellent shorting opportunity later on this summer....

OIL CREEPS UP CLOSE TO ALL TIME HIGHS

In case you hadn't noticed, crude oil is flirting with all time highs, standing just below $75 as we write. The reasons may at first sight be news led, given that Iran has just postponed a planned meeting with the European Union to discuss incentives to end the standoff supported crude's rise. EU foreign policy chief Javier Solana had been due to meet Iranian nuclear negotiator Ali Larijani yesterday, but they are now scheduled to meet in Brussels today and on July 11. Solana, surprised by Larijani's sudden postponement, has made it clear the West wants a quick answer on its incentives for Iran to halt uranium enrichment.

The geopolitical tension was also heightened after North Korea, labelled by George Bush as part of the "axis of evil," launched a series of missiles into the Japan Sea. The missiles included a long range one able to reach Alaska, although it apparently failed 40 seconds into its flight, according to U.S. officials. Even so, there is some political posturing going on, which is unlikely to go away in the short term.

The actual technical price pattern on crude oil is unusual with a very gentle but relentless rally for the last two weeks. This has taken the price up to the top of the last four months' trading range around $75, which as we have noted is also the all time high. This would be the fourth attempt, which usually results in success, and the presence of so many white candlesticks is highly bullish, but it all looks too simple, so we would expect some backing and filling before we are prepared to put out a firm buy signal from here.

GUS IN PLAY

Back in March we put out a buy note on GUS following a good results statement that included news of the possible demerger of Argos and Experian within the ensuing six to twelve months. That recommendation turned out to be a fail, as we were stopped out quickly on a poor response by the market over the next day or two.

Since then, the shares have fared badly against the wider market, which is not unusual given the consumer bias to the business, but the interesting thing is that there has been very little selling volume over the last three months. Acquirers of stock throughout June have therefore proved to be astute as yesterday GUS announced that it had received a number of approaches and rebuffed all of them. The group added that having considered the merits of the approaches, it concluded shareholder interests would be better served by proceeding with the previously announced demergers.

In our view, this raises the question as to whether GUS is mulling extracting a higher price for shareholders for the entire group, but most of all it reflects that investors do see value in the UK with M&A activity continuing in various sectors. Maybe this explains why the FTSE is relatively strong, but more to the point, it looks as though GUS's period of underperformance has now finished. A long term buy, but short term traders should await a small pullback before going long.

BUY BT GROUP
TICKER: BT 
TARGET: 4% plus 
UK  
STOP: 2% 

TECHNICALS:
BT has moved to the forefront of outperformance against the FTSE 100 index, and now appears to have cleared fairly important resistance around 236p, which was our previous target. The sky is the limit now, and buying volume support continues to be excellent. We suggest going long again with an extrapolated target of 256p, and possibly considerably higher. Stops should be placed below Monday's low, and we suggest 234p as a suitable stop level.

LATEST SIGNIFICANT FUNDAMENTALS:
For the three months to 31 March the group posted a 1% increase in earnings before interest, tax, depreciation and amortisation and before specific items and leaver costs to £1.50bn. The underlying figure showed a slight decrease to £1.43bn from £1.44bn last time, but still matched forecasts. Profit before tax, specific items and leaver costs rose 4% to £629m during the period, while revenue jumped 7% to £5.13bn. New wave revenues, which cover broadband Internet and corporate networked IT services, leapt 28% to £1.85bn.  The full year dividend rose 14% to 11.9p per share after the group announced a final payout of 7.6p.

RISK AND DURATION INFO:
10 Day Trade Plus                  
Risk 7/10              
Trade Rating 8/10        

BEST CASE SCENARIO: Impulsive new highs above 260p

NIGHTMARE SCENARIO: 200 day moving average at 221p 

SELL PARTY GAMING
TICKER: PRTY 
TARGET: 4% plus 
UK  
STOP: 2% 

TECHNICALS:
Where we stand now is interesting, with the shares having settled again under the 200 day moving average and showing no great buying volume support. Also, underperformance against the FTSE 100 index has returned so we have recently been looking for a good selling opportunity. We now have that with a lower high yesterday, after the high seen at 125.5p two weeks ago. The target for sellers is the important low at 106p, and acceptance below that level would indicate much lower prices. Party is a highly volatile stock so traders should set stops slightly wider and reduce trade size accordingly. We suggest a stop at 118.5p.

LATEST SIGNIFICANT FUNDAMENTALS:
On 23rd May, Party Gaming said Anurag Dikshit, one of its founders, had resigned as group operations director and from the board, to focus on the development of new products and platforms as head of research and special projects. In addition, Vikrant Bhargava, group marketing director and also a founder of Party Gaming, told the board that he wished to resign from the board and leave the company at the end of the year to pursue other interests.

RISK AND DURATION INFO:
10 Day Plus trade                    
Risk 9/10                  
Trade Rating 7/10

BEST CASE SCENARIO: Impulsive new lows below 100p

NIGHTMARE SCENARIO: 200 day moving average at 127p 

BUY SCOTTISH & SOUTHERN ELECTRICITY
TICKER: SSE 
TARGET: 4% plus 
UK  
STOP: 2% 

TECHNICALS:
The shares of SSE have been virtually unaffected by recent market turbulence and what we now have is a potential breakout following a broad four month trading range. This can be viewed as a consolidation pattern after the good rise between December and March which saw a 25% rerating. With good buying volume support and continuing outperformance of the FTSE 100 index, we can target a move to some resistance around 1190p, and then possibly significantly higher in due course. Stops should be placed at 1125p, just below Tuesday?s low.

LATEST SIGNIFICANT FUNDAMENTALS:
SSE said the division had grown its customer base to more than 6.7 million at the end of March this year, representing a net gain of 600,000 during the year and of 2.2 million since 2002. The group said it would hold electricity and gas prices at their current levels until at least the start of 2007. It added that it had entered into an agreement with I&H Brown Ltd to acquire two wind farm developments, comprising 98MW of capacity, subject to planning approval and electricity network capacity being secured.  SSE said it was raising its full year dividend by 9.4% to 46.5p per share. Adjusted earnings per share lifted by 16.1% to 72.9p per share.

RISK AND DURATION INFO:
10 Day Trade Plus                  
Risk  7/10              
Trade Rating 7/10        

BEST CASE SCENARIO: Impulsive new highs above1250p

NIGHTMARE SCENARIO: 200 day moving average at 1080p