 Hello and welcome to CMC Markets on Tuesday the 11th of October and this quick look at the markets and I think most people's attention at the moment is on the FTSE 100 and whether or not we can actually break through those previous peaks at 71-22, 71-25. The 2015 peaks we've had another look at them and we are currently in the process of retesting those particular levels. Key support remains back at 69-55 but at the moment we are struggling to push significantly through those peaks and I think the big question going forward is whether or not we have enough momentum to do so. Certainly the weaker pound is playing in to the narrative of a stronger FTSE but there is another factor I think also driving the FTSE higher and I think that's the rebound that we're seeing in commodity prices, namely oil and gas stocks. If we look for example at Royal Dutch Shell we can see that that is significantly higher from the lows that we saw at the beginning of 2016 up 65% as fears about the reduction or fears about a reduction in the dividend start to dissipate. I certainly don't think those concerns have gone away even though oil prices have significantly recovered from the lows that we saw earlier this year. I don't think it's any coincidence that the oil price rally has coincided with the rebound in the share price of the oil majors as well. That's certainly driving the rebound and I think the big question that really needs to be asked in the context of the rebound that we're seeing in not only Royal Dutch Shell shares but also BP shares is whether or not this rebound in oil and gas stocks has further to go. Markets generally tend to be forward-looking and actually if we look at BP's share price it is now approaching levels or peaks that we last saw in 2011, 2012 and 2014. So on a valuation basis it is actually looking quite expensive certainly in the context of where the share price has been over the course of the last few years. In 2014 it was only briefly above that £5 level. Now we are heading back towards that but again I think there is a concern that it is starting to get a little bit stretched at these sorts of levels. So we need to be careful about how much further upside there is in oil and gas stocks. That needs to be looked through a prism of where crude oil prices are and again if we have a look at this Brent crude chart and a WTI chart we can see that oil prices are pushing against a significant resistance level not only on Brent crude but WTI as well. Now what's causing this test? Well it's not hard to see why. OPEC and non-OPEC members have been continually talking the oil price up over the course of the past few months. Ultimately they've been talking about a production freeze or a production cut. Vladimir Putin the president of Russia has been the latest to weigh in on that subject by suggesting that Russia might be open to just such an agreement but words for me count for very little. They help in some respects in pushing the price up but ultimately it's about what oil producers do and Russia is pumping at record levels. Iran is looking to boost its production back to pre-sanction levels of 4 million barrels a day which really only leaves as the only remaining swing producer Saudi Arabia as the prospect that it will look at cut its output. Now talking about cutting output and actually doing it two totally different things. So ultimately while the momentum is for a higher oil price we are pushing it against a significant resistance area on the Brent contract here. 61.8 Fibonacci retracement from the May peaks in 2015 to the lows that we saw in early to mid January on Brent crude comes in around about $53 a barrel which was pretty much the peaks that we saw earlier this month and that's before you even factor in the prospect that shale producers could bring could bring back output onto the market as the oil price pushes ever higher and also the fact that a strong dollar could actually also start to weigh on the oil price. So let's look at the resistance levels on WTI because they're fairly similar and again we're pushing against the June peaks that we saw at around about 51 51.5 dollars a barrel. So again we can see we're once again pushing against a very significant resistance area on WTI. For Brent crude to break out on WTI to break out I want to see breaks on both those contracts higher really to open up the levels that we saw at through the middle of 2015. So we're talking about 55 $60 a barrel and we can and I think that is what is required to see a higher footsie. A move higher in the oil price but also a slightly weaker pound as well and there does appear to be some evidence that potentially we could be getting towards a short-term base in the pound. Everyone's talking the pound lower everyone's revising their forecast lower at some point that needs to stabilize and I know that's a very difficult call to make given current sentiment towards the pound but with the footsie 100 at all time peaks and Brent crude pushing against significant resistance levels there has to be a correlation there and ultimately you've also got the fact that a weaker pound is feeding in to the firmer footsie. So when you weigh all of those factors up unless we get a significant break higher in the oil price I think it's going to be very difficult for a footsie 100 to push significantly beyond 70, 130 and make higher prices without a significant also without a significant further weakness in the pound and at the moment it's struggling around that 123 area. We'll have to wait and see but ultimately the charts are telling me there's resistance in the footsie there's resistance in crude oil until those break to collectively then I think it's hard to see the case further upside in the footsie at this point in time. So that's it for this week thanks very much for listening this is Michael Houston talking to you from CMC Markets.