Good morning. Well yesterday was a bit dull after the initial dip down to the pivot area. That long just sat there till the close pretty much! I think it’s in a wait and see mode waiting for the Fed next week and what the future holds for QE and the tapering situation. Normally slow grinds higher like this are on the retail money coming in, which usually means we will see a reversal soon. we are back at that 6590 level, having held fairly steady overnight and if the bulls can break 6600 then I expect 6627 still. The daily channels are still heading up now so despite the rise being weak yesterday, there is still a bullish trend. To invalidate it, same as yesterday, we would need to drop below 6550. It looks like the Syria situation is calming down, I expect there has been rather a lot of back room deals and meetings going on the past couple of weeks. UK unemployment fell 0.1% yesterday, apparently fuelled by a boom in estate agent hiring’s! With house prices rising the rhetoric has started about another bubble etc and its needs to be capped, “help to buy” needs to be canned, but I think the bottom line is that whilst prices are rising, people and lenders are probably a little bit more cautious this time round about over extending themselves with overleveraged debt. You’d hope so anyway!
Asia Overnight from Bloomberg
Asia’s benchmark stock index swung between gains and losses after Japanese machinery orders accelerated less than expected and as investors await the outcome of the Federal Reserve’s meeting next week.
The MSCI Asia Pacific Index was little changed at 137.67 as of 12:20 p.m. in Tokyo, trading near a three-month high. The measure, which swung between gains and losses of 0.1 percent today, climbed 6.6 percent in the past 10 days amid signs the global economy is improving. The rally drove the gauge’s 14-day relative strength index, an indicator of trading momentum, to 67, near a threshold of 70 that signals to analyst shares may have risen too far.
“We’re in wait-and-see mode ahead of next week’s Federal Open Market Committee meeting,” said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management Co. in Tokyo. “While the situation in Syria has calmed for now and China looks like it’s seen the worst of its slowdown, buying after the Olympics news seems to have run its course and the yen has stopped weakening, making exporters less attractive.”
The Federal Reserve has said any reduction in stimulus will be tied to a sustained recovery in U.S. employment. The central bank will decide to cut its $85 billion in monthly bond purchases when it meets Sept. 17-18, according to 65 percent of economists surveyed by Bloomberg last month.
U.S. Futures
Futures on the Standard & Poor’s 500 Index lost 0.1 percent. The gauge gained 0.3 percent to a one-month high in New York yesterday as diminishing concern over a military strike against Syria offset Apple Inc.’s biggest decline since April after the company introduced a cheaper iPhone.
Outlook
The same 30 minute channel is still in play with the bottom area holding yesterday, despite dipping slightly below the pivot. We have a narrowing triangle in play though so there will shortly be a break one way or the other, and with Dax, S&P near resistance, and gold near support, I’d be inclined to say a break lower. That triangle is formed by the rising channel, but there is also a declining red trend line with resistance at 6595. The question is where to go short from? The best bet is probably fade some in at 6602, 6625 bearing in mind the resistance levels mentioned below. I am also hoping we get a dip back in gold to the 1353/54 area as that will be good for a long I feel. On the FTSE I feel a short off those areas mentioned for a dip to 6550 is on the cards. I have plotted the arrows with the rise continuing as we are only 10 away from the daily pivot at 6579, and the EMAs are currently positive. Shorter time frames are a bit messy and confused so whilst there may be an initial dip, I think the bulls will still be in play initially.