6714 or thereabouts will need to be defended today, and break 6750 for more upside

Good morning. Well the pivot and bottom of the 10 day Bianca channel held ok yesterday but the bulls really couldn’t break through the 6750 area despite a couple of attempts. The FTSE was actually quite resilient yesterday as the US markets experienced quite a drop – (looking at the S&P)  from 1838 to 1823. There is quite a bit of caution about and usually the first week of January trading is quite bullish, if it isn’t then we could be in for a fairly downbeat year. The main news event that everyone’s waiting for is the payrolls data on Friday. It was also confirmed that Yellen will be Fed chairman replacing Ben Bernanke on Jan 31^st, with a 56-26 vote win.

Asia Overnight from Bloomberg

Asian stocks fell, with the regional benchmark index poised to drop for a fourth day, as a report showed U.S. service industries expanded less than expected and raw-material shares led declines.

The MSCI Asia Pacific Index lost 0.3 percent to 138.80 as of 1:44 p.m. in Tokyo after rising as much as 0.2 percent. Janet Yellen won U.S. Senate confirmation to become the 15th chairman of the Federal Reserve and the first woman to head the central bank in its 100-year history.

“There’s a little bit of pullback from” a strong rally at the end of 2013, said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $160 billion. “The U.S. payrolls data on Friday night is probably going to be quite important. That’s the key macro data this week, but we might get some cautiousness throughout January, up until the next FOMC meeting.”

The U.S. Labor Department will release the unemployment rate and new hiring figures for last month on Jan. 10. The Federal Open Market Committee said last month it plans to taper monthly bond purchases to $75 billion from $85 billion starting January, saying in a statement that “labor-market conditions have shown further improvement.” The committee is scheduled to meet Jan. 28-29.

U.S. Services

Futures on the Standard & Poor’s 500 Index added 0.2 percent today. The measure lost 0.3 percent yesterday after slower-than-forecast growth in U.S. service industries. The Institute for Supply Management’s non-manufacturing index decreased to 53 in December from 53.9 in November, a report from the Tempe, Arizona-based group showed. The median projection in a Bloomberg survey of 69 economists was 54.7. A reading above 50 indicates expansion.

Yellen, 67, was confirmed as Fed chairman by a 56-26 vote, with 11 Republicans supporting her. She’ll replace Ben S. Bernanke, whose second term as chairman expires Jan. 31.

Currently Fed vice chairman, Yellen has backed Bernanke’s efforts to steer the economy through its most severe crisis since the 1930s with record-low interest rates and three rounds of bond buying that have swelled Fed assets to $4.02 trillion. She pledged in a Nov. 14 confirmation hearing to press on with accommodation until achieving a “strong recovery.”

Yellen’s nomination “will have a very market friendly outcome,” said Chris Weston, chief strategist at IG Markets Ltd. in Melbourne. “It’s really now down to growth and the ability of Yellen to communicate that superiority to the market because the market has clearly moved away from tapering to the credibility of the Fed’s forward guidance.”

FTSE Outlook

There are currently 2 channels in play on the 30 minute chart, one heading up with support at 6726 and resistance at 6766, and the other heading down, with resistance at 6747 and support at 6705. As with the Dax and S&P we are bang on the daily pivot at 6732 as I write this, and with the 30 minute EMAs showing a weak bulls this level could hold. The bottom of the 10 day Bianca channel is 6707 and in an ideal world I would like to get a rise to 6850/6950 in the next few weeks to open up a decent shorting area. Interestingly the top of the Bianca channels are swinging up to that sort of level as well.

I still think we will see 6766 shortly, provided that yesterday’s resistance at 6752 breaks. 6807 is still on the cards also. On the flip side, if the bears break the daily pivot then a drop to 6714 looks likely, and possibly 6688.

The 10 day Raff channel is pretty narrow at the moment but both that and the 20 day Raff have support around that 6690/6700 area so I think a swing long from around there should be ok, but might need a slightly wider stop at 6680., if it dips that far.

That said, I think that on the 30 minute chart the rising channel will be the one in play, after an initial dip from the top of the declining one, at 6750. I have put several trades below as it’s a bit of a mixed bag today.