Good morning. A pretty bullish day yesterday trending in one direction, fortunately taking our long from 6220 with it. As it happened it rose all the way to the 6320 level after the bell, even managing 6340 before its dropped back a bit overnight. Not by much though! The top of the 10 day Bianca channel is 6339 so the bulls will be keen to break this level this morning to push higher but the problem with rising too far too fast is that you then get a sharp correction in the other direction, so be cautious for longs as we start to test the upper bands of the daily channels (Raff 20 day is also 6340), and we also have a daily RSI figure of 66 currently.
US & Asia Overnight from Bloomberg
Asian stocks rose for a fifth day, following gains in U.S. equities, amid speculation that global central bank policy will remain accommodative to counteract weak economic growth.
The MSCI Asia Pacific Index climbed 0.8 percent to 128.88 as of 9 a.m. in Tokyo, extending its five-day gain to 6.4 percent. Futures traders see only a 10 percent chance the Federal Reserve will raise interest rates at its Oct. 27-28 meeting following weaker-than-expected employment growth, while 17 of 36 economists surveyed by Bloomberg expect additional easing from the Bank of Japan by the end of the month.
“Markets continue to believe that weak data will pressure central banks in Europe and Japan to provide more stimulus and will delay the U.S. Fed in its pursuit to begin withdrawing monetary stimulus,” said Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, which manages about $21 billion. This “continues to have investors believe that asset prices can defy the weak growth environment.”
Japan’s Topix index rose 1.4 percent after the yen weakened 0.5 percent on Monday. Prime Minister Shinzo Abe’s efforts to push through structural changes to recharge Japan’s economy got a boost as negotiators reached a deal on a Pacific trade pact that would create the world’s biggest regional trade zone. The Trans-Pacific Partnership still needs to be ratified by lawmakers in the 12 member nations.
Australia’s S&P/ASX 200 Index gained 1.2 percent and New Zealand’s NZX 50 Index climbed 0.8 percent. South Korea’s Kospi index rose 1 percent. Mainland Chinese markets remain closed for a holiday, while Hong Kong is yet to open. Futures on the Hang Seng Index gained 1.2 percent.
The pace of growth in U.S. services industries cooled last month from the best readings in a decade, a sign consumers may be taking demand down to a more sustainable level in the face of global weakness. The Institute for Supply Management’s non-manufacturing index declined to 56.9 in September from 59 the prior month, the Tempe, Arizona-based group said Monday.
Traders see a 35 percent probability that the Fed will raise its target rate by December, down from a 58 percent likelihood seen a month ago, according to futures data compiled by Bloomberg.
In Japan, the Bank of Japan starts a two-day meeting Tuesday. Two of 36 economists surveyed by Bloomberg expect additional stimulus this week, with 15 more forecasting the central bank will ease policy at its Oct. 30 meeting.
E-mini futures on the Standard & Poor’s 500 Index slid 0.2 percent Tuesday. The underlying measure added 1.8 percent on Monday to cap its longest stretch of gains this year. [Bloomberg]
My bullishness has weakened today and I wouldn’t be surprised if we get a dip down to the 6220 area from where we are as I am writing this (6320) to test the bottom of the 30min channel. Below that we have the 30min 200ema at 6180ish, along with a major PRT support line. A mentioned above I am always a bit wary when we have a few up days on the trot, especially trending ones as its like its risen too far too fast, everything becomes over extended and therefore I expect a snap back at some point – same as if it drops too far too fast. So, for today I think a short now to target at the very least the daily pivot at 6288, and possibly 6220 below that. If the bulls defend that level then a rise back to the 6300 level and a period of consolidation after the recent rises while we await the next bit of news! My 10min chart is bearish to start the day, whilst the 30min is still bullish, but with the gap between the moving averages narrowing – so early bear will more than likely lead to a cross and a bear signal.