Good morning. Well after a great Tuesday a not so great Wednesday as the 2 orders missed in the opening 30minutes by 4 points, and the later short when it did hit 6510 failed, apologies. Think it was all a bit unsure after the voting results what it wanted to do. Today is another day and the bulls need to break 6546 to push any higher, whilst the 6500 area looks like it will provide support. Below that the bottom of the 10 day Bianca that held so well the other day is 6459 – a second touch likely to support. Talking of voting it will be all eyes on the Rochester and Strood by-election 20th November to give some general election clues…. Today however sees the ECB rate decision announcement and also Draghi’s press conference – is it Europe’s turn to receive the stimulus baton from Japan, who in turn received it from the US?
Asia Overnight from Bloomberg
U.S. equity-index futures dropped with Asian stocks, as Japanese shares dragged the regional index lower and gold rose from a four-year low. The euro climbed before the European Central Bank decides monetary policy.
The MSCI Asia Pacific Index slipped 0.4 percent by 2:27 p.m. in Tokyo, as the Topix index retreated 1 percent and futures on the Standard & Poor’s 500 Index fell 0.3 percent. The euro climbed against most major currencies and earlier traded at the strongest level versus the yen since Jan. 2. Gold for immediate delivery climbed 0.5 percent to $1,146.33.
The ECB is expected to hold rates at record lows when it meets for the first time since the Bank of Japanboosted its unprecedented stimulus, a move that stoked a rout in the yen and fueled gains in the nation’s equities. The Bank of England is also seen holding rates today. Private payroll data yesterday showed U.S. companies added more workers in October than in September, with the government’s monthly report due tomorrow.
The S&P 500 rose 0.6 percent to an all-time high of 2,023.57 yesterday, while the Dow Jones Industrial Average gained 0.6 percent to a record 17,484.53 after the Republican Party won control of the U.S. Senate. Victory in the mid-term elections positions the Republicans to set the legislative agenda for the last two years of Barack Obama’s presidency.
ECB Pressure
A flagging euro-area economy and increased monetary stimulus from the BOJ has put pressure on Europe’s policy makers to do more. More than half of the economists surveyed by Bloomberg News predict the ECB will eventually embark on large-scale sovereign-bond purchases.
The yen erased losses after the dollar earlier bought more than 115 yen for the first time since Nov. 2, 2007. Most BOJ members agreed with undertaking monetary easing until inflation is stable at 2 percent, according to minutes of the banks Oct. 6-7 meeting released today. The yen has lost about 5 percent against the dollar from the close of trading Oct. 30, while the stimulus boosts prospects of an economic recovery.
All but five of the 33 industry groups on the Topix fell today after the measure’s 14-day relative-strength index finished yesterday above the 70 level that some investors use to signify that stocks have risen too far, too quickly. The gauge surged 9.6 percent in the five trading days from Oct. 28 through yesterday. The surge saw the MSCI Asia Pacific Index close at a six-week high on Nov. 4.
‘Alarming Pace’
“Stocks have risen at an alarming pace,” said Takashi Ushio, head of investment at Marusan Securities Co. “There’s been profit taking after a sizeable amount of futures were sold ahead of events such as the ECB meeting and U.S. jobs data.”
Hong Kong’s Hang Seng Index dropped 0.2 percent and a gauge of Chinese shares in the city retreated 0.7 percent. The Shanghai Composite Index (SHCOMP) slid 0.4 percent, falling a second day as utility companies slumped after Huaneng Power International Inc. announced a private share sale that was below market prices.
Gold is rising after yesterday trading at as little as $1,137.94 per ounce, the lowest price since April 2010, as the Bloomberg Dollar Spot Index climbed to a five-year high. The yellow metal is heading for the first consecutive annual decline since 2000 as the Federal Reserve prepares to raise interest rates amid an improving economy while other central banks seek to boost growth.
The Bloomberg Dollar Spot Index fell 0.3 percent.
Russia’s ruble tumbled 2.6 percent yesterday to new record low of 44.8748 per dollar. The ruble only briefly pared losses before resuming its plunge yesterday after the Bank of Russia shifted its intervention policy yesterday, saying it would offer as much foreign currency as it deemed necessary.[From here]
FTSE Outlook
Today sees resistance a 6549 where we have the top of a rising 30minute channel. FTSE futures have help up well overnight, not really breaking below the top of the fib pivot cloud at 6517. As such I think we will get an initial rise this morning, most likely fuelled by expectations of favourable stimulus news from the ECB. UK rates also being announced, I expect to remain unchanged. Resistance above that channel is 6573 then the top of the 10 day Bianca at 6602 – a level that might be worth layering some shorts at, the 20 day is not much higher at 6633. Support as mentioned is the 6517 area, below that 6500 is the most likely level to watch, followed by the bottom of the 10 day Bianca channel at 6459. I have put in a rise to the top of that channel and then a drop down to 6500. The US is holding up quite well still, S&P hovering around 2020 so I think they will decide the direction this afternoon if we do drop to 6500. If the S&P breaks 2017 then that will drag the FTSE down, most likely to 6459. If the S&P breaks 2025 then 2033 looks possible, which will pull the FTSE up to the 6600 level I expect.
Support so entry levels for a possible long
- 6516
- 6510 daily pivot
- 6459
- 6360
Resistance so entry levels for a possible short
- 6546
- 6573
- 6602
- 6633