Good morning. Nice bounce yesterday off the 6550 level however the bulls failed to gain any ground above the 6585 area and as expected had a long hard slog to get that rise. Still, it played out as planned and hopefully you picked up some points too. With it being such hard work for the bulls yesterday, and despite the strong bounce on the S&P I think its probably best to have a slightly bearish bias now. We are still nudging the bottom of the daily Bianca channels, whilst the 10 day Raff is firmly pointing down. Short the rallies today I think! US consumer confidence came in worse than expected yesterday to a 4 month low, maybe the start of the good news about how well the various economies are doing starting to wane. News seems to go in cycles whereby you have a run of good, then a run of bad and so on.
Asia Overnight from Bloomberg
Asian stocks fell for a second day, paring the best monthly advance since January 2012 for the regional benchmark index, after U.S. consumer confidence slumped in September to a four-month low.
The MSCI Asia Pacific Index fell 0.2 percent to 140.21 as of 12:30 p.m. in Hong Kong, with nine of the 10 industry groups on the gauge declining. The measure dropped 0.6 percent yesterday. It climbed 7.9 percent in September through yesterday, on course for the best month since January 2012, after the Federal Reserve maintained the pace of its stimulus and data showed China’s economic growth is stabilizing.
“U.S. consumer confidence was down, albeit slightly, but enough to rattle already frayed nerves,” Andrew May, a sales trader at CMC Markets in Auckland, said in an e-mail. “As we’re in the last week and month of the quarter, expect to see traders continue to take a little more profit off the table as they reposition themselves.”
US Futures
Futures on the Standard & Poor’s 500 Index were little changed after the gauge fell 0.3 percent yesterday amid concerns over U.S. budget talks and economic growth as investors weighed prospects for easing tensions in the Middle East. The index has declined 1.6 percent over four days after reaching an all-time high of 1,725.52 as the Fed refrained from cutting stimulus.
The Conference Board’s index of U.S. consumer confidence slumped in September to a four-month low and a separate report showed a gauge of manufacturing in the region covered by the Federal Reserve Bank of Richmond shrank in September.
Outlook
The FTSE failed to break through the 200ema yesterday so whilst we picked up a decent amount of bull points, the failure at 6585 meant 6600 was a big ask. I suspected that the bulls would struggle and they did. That 6585 is the line in the sand, and if the bulls could break that then we should get 6600 and the 6615 mentioned yesterday. Initially today there is support at 6557 but if that breaks and the bears really get control then the fib lines at 6533 and 6517 become likely targets. It looks like we will test 6555 pre market of at the open which might see a small bounce but I think the bulls will have their work cut out today to get above 6585. We have the bottom of the 10 day Bianca channel at 6548 today and are currently flirting with the bottom of the 20 day at 6568. If the 10 day breaks then I think we will drop to the 6517 area, then possible bounce back later in the week. I have gone for an initial early long at 6557 with a stop below that 10 day channel for an opening trade, but then a short off yesterday’s resistance and the 200ema/ProTrend channel at 6580ish.