Good morning. Here we are at the end of August and its been quite the rollercoaster! UK markets are closed on Monday for the bank holiday so back for the start of the new month upon Tuesday. As such I think a lot of traders will be glad to see the back of August! We got a decent rally yesterday with prices rising above 6200 during the session and peaking at 6230 after the bell. Dropped back a bit since, so we may see some profit taking today, especially as we have a long weekend coming up. A dip from the 6200 area towards 6168, and 6145 I am thinking.
US & Asia Overnight from Bloomberg
Asian stocks rose for a third day as a global rally gathered pace and the U.S. economy grew faster than expected in the second quarter.
The MSCI Asia Pacific Index gained 0.4 percent to 129.32 as of 9:01 a.m. in Tokyo. The gauge, which began this week with a two-day 5.1 percent slump, has rallied the past three days. Futures contracts indicated Chinese markets will continue a rebound, with contracts on the FTSE China A50 Index gaining 2.3 percent and those on the Hang Seng China Enterprises Index rising 1.8 percent.
Data on Thursday showed U.S. gross domestic product rose at a 3.7 percent annualized rate, exceeding all estimates of economists surveyed by Bloomberg, and up from the 2.3 percent reported last month. A separate report showed filings for jobless benefits declined to a three-week low.
“It gave credence to the story that the U.S. economy could be building momentum,” said Chris Green, an Auckland-based strategist at First NZ Capital Ltd. “In the world we’re looking at now, that is of some comfort. We seem to have gained some sort of stability and people are focusing more on the underlying strength of the U.S. economy.”
The data come as Federal Reserve policy makers debate whether growth is strong enough to withstand the first increase in the interest rate since 2006. Central bankers gather at Jackson Hole, Wyoming, for a discussion on inflation just as China’s slowdown renews fears of falling prices. Fed Chair Janet Yellen won’t attend this year.
Regional IndexesJapan’s Topix index advanced 2 percent. South Korea’s Kospi index gained 1.3 percent and Australia’s S&P/ASX 200 Index rose 0.5 percent. New Zealand’s NZX 50 Index added 0.9 percent.
This three-day rally halted a global selloff that engulfed markets since China devalued its currency on Aug. 11, an unexpected move that ignited concern that the slowdown in the world’s second-largest economy may threaten global growth.
“It’s been a very volatile week and I’m glad it’s over,” Green said. [Bloomberg]
Today’s pivot is 6168 and I think we will have a dip this morning to test that level, either from 6200 or slightly higher if the bulls are quick out the blocks, 6235 which is yesterday high and the top of the 10 day Raff. Generally i am still bullish going into September and I expect us to see 6420/6450 next week. I don’t think rates will be adjusted next month. As mentioned yesterday I wouldn’t be surprised if the Dow rises to 17250 on this bounce from this weeks lows. I have gone for an initial dip as the 10 min chat has swung to bearish overnight, however the 30min and above are all still bullish, hence why i have plotted fairly shallow dipping arrows for the bearishness. Its a Friday before a bank holiday so I don’t expect lots of traders to be piling into new positions. We have our GDP data out at 09:30 forecasted at 2.6% so will be interesting to see what that result is. There is also some German CPI news out at 1pm so might get some movement around then too.