Good morning. The FTSE was a bit more bearish than expected yesterday, testing both the support levels mentioned at 6570 and 6550, both of which set up bounces for a few points. The bulls didn’t manage to break the 6600 area in the end. We are currently smack on the bottom of the 20 day Raff channel which could set up the bounce, also the S&P could bounce from its current level to 1710. If that latter doesn’t then 1688 next stop! We also have the T3 coral line on the daily at 6540 currently, so a few bits of support for the bulls. Draghi was speaking yesterday, addressing the European Parliament, he said: “We are ready to use any instrument, including another LTRO if needed, to maintain short-term money market rates at a level which is warranted by our assessment of inflation in the medium-term.” This is on top of the billions pumped in in December 2011 and February 2012. To make him say that makes me think something is brewing and as we all know the Eurozone still isn’t out of the woods yet.
Asia Overnight from Bloomberg
Asian stocks dropped, dragging down the benchmark gauge from a four-month high, as Japanese exporters retreated amid a three-day gain in the yen. Copper fell, while precious metals rebounded. The MSCI Asia Pacific Index lost 0.8 percent at 1:33 p.m. in Tokyo, heading for its biggest decline in four weeks. Japan’s Topix dropped 0.7 percent and Standard & Poor’s 500 Index futures slipped 0.2 percent. The yen has gained against 15 of 16 major peers since last week, while Indonesia’s rupiah fell to the weakest level since 2009 against the dollar. Copper sank for a third day as gold and silver rose.
The U.S. Senate is considering a measure passed by the House on Sept. 20 that would cut off money for President Barack Obama’s health-care law while financing the federal government through mid-December. Data today may show U.S. home prices climbed in July, while Germany’s Ifo business climate index probably rose for a fifth month in September.
“The increasingly ugly debate on the U.S. fiscal position is certainly a primary concern for markets,” said Angus Gluskie, the chief investment officer at White Funds Management Ltd. in Sydney, where he helps oversee about $500 million.
Debt Ceiling
New York Fed President William C. Dudley said yesterday the U.S. economy “still needs the support of a very accommodative monetary policy,” while his Atlanta counterpart Dennis Lockhart said policy should focus on creating a more dynamic economy after a recent cooling in growth. Fed Bank of Cleveland President Sandra Pianalto speaks today. Government funding expires Oct. 1 and the Treasury is expected to exhaust its ability to borrow funds in mid-October, when it will reach the statutory debt limit. The White House said Obama would veto the House bill and Senate Majority Leader Harry Reid said the bill is “dead on arrival.”
Outlook
The FTSE had a decent bounce at the end of Mondays session and after to rise 20 or so points and I expect that we will get a bit of a bounce today. We have already climbed a bit at price was 6551 when I started this email and its now 6565. I have put a zig zag rise on the prediction for today as I expect some resistance at the levels mentioned below and the ProTrend line at 6585. I don’t think it will be an easy day for the bulls, if they do manage to bounce off this 20 day Raff channel. The key will be breaking the pivot and the 6570 area for the bulls to push on. If the bears get their teeth into things and the Raff breaks then we could dip to 6510 bottom of the 10 day Raff (6508 is also S2), or break 6500 to test 6473 being S3 for today.