Good morning, well yesterday turned into one of those trending days that doesn’t suit my style at all, with the longs at 6385 and 6350 both getting stopped out. My other support level was 6310. I didn’t long off that one (was out of hours at about 10pm) and guess what, that one bounced! Typical and sometimes it just isn’t your day. Still, after Mondays lucrative day can’t really grumble and I had tight stops on the longs anyway so minimal damage. I do find that it pays to make sure your entry levels are key, rather than just placing trades willy nilly, go in at recognised levels, that way you can have a tight stop, and if the price breaks below such a key level then generally it will go further. I am attributing yesterday’s fall to the ongoing US deadlock situation, and it sounded like Obama is getting fed up with it now too during his speech yesterday – accusing the Republicans of ‘extortion’. Today sees him nominate Yellen as the Fed chair to replace Ben Bernanke. Markets should be happy with that as she will maintain similar policies to Bernanke (mainly QE). Even yesterday’s positive news from the IMF (or about face, depending on how you look at it) on the UK economy couldn’t stop the falls, and they have revised their latest guesses to 1.4% growth this year and didn’t lay into Osborne this time. That’s double the rate they guessed in April. I keep saying guess, they call it a forecast. One and the same in my book. Osborne will be delighted that he can stick 2 fingers up at them I imagine!
Asia Overnight from Bloomberg
Asian stocks outside Japan fell on concern the impasse over the U.S. debt limit may lead to a default and after the International Monetary Fund cut its global outlook. Japanese shares reversed losses after the yen weakened.
The MSCI Asia Pacific ex-Japan Index slid 0.3 percent to 465.36 as of 1:53 p.m. in Tokyo, while the broader regional gauge rose 0.1 percent to 138.65. Japan’s Topix index rose 1 percent, erasing a 1 percent loss. The Standard & Poor’s 500 Index slumped 1.2 percent yesterday after President Barack Obama said the U.S. economy risks a “very deep recession” should Congress not raise the $16.7 trillion borrowing limit.
“Markets don’t like indecision and bickering by the government,” said Angus Gluskie, managing director at White Funds Management in Sydney who manages about $550 million. “Political parties are prepared to use these agreements as a bargaining chip. You certainly see a point of nervousness and concern for investors.”
The International Monetary Fund cut its global outlook for this year and next as capital outflows further weaken emerging markets, and warned that a U.S. government default could “seriously damage” the world economy. Growth worldwide will be 2.9 percent this year and 3.6 percent next year, the IMF said, compared with July predictions of 3.1 percent for 2013 and 3.8 percent for next year.
S&P Futures
Futures on the S&P 500 gained 0.3 percent as the White House prepared to nominate Janet Yellen to succeed Ben S. Bernanke as chairman of the Federal Reserve. Yellen, vice chairman of the central bank since 2010, has articulated the case for maintaining accommodative monetary policy.
“Generally people feel Yellen will take a line that’s not dissimilar from Bernanke, which will be reasonably dovish and accordingly supportive for markets,” Gluskie at White Funds Management said.
FTSE Outlook
It doesn’t look that rosy for the FTSE and I have mentioned 6200 early November before though it looks like it might come sooner. With the close below the important 6390 level I might even go so far as saying that we could be on for 6100, maybe 6060. However, once that has dropped then it does set up a year end bounce so I think we will still end the year looking alright. Today’s pivot is 6389 and I think the bulls will fight back a bit this morning, as they often do after a trending day, and prices will rise to that level. However, there is downside pressure and failure to break that level will see another drop. We are certainly testing the bottom of the Bianca channel at the moment, once again with all 3 clustered around 6340ish. Bulls need to exceed 6460 to invalidate the bearish tones currently persisting, though we have had a decent bounce off the 6310 level mentioned yesterday, and also the bottom of the Raff channels. For today, 6385 also marks the 61.8% fib retracement of yesterday’s fall, so coupled with 6390 being previous support, the daily pivot and that I expect that level would be good for a short entry. All the while the US uncertainty continues the momentum is with the bears, however, a resolution on that and the debt ceiling could see that change back to bull. Maybe after we get that 6200 though!