Good morning. Well we got the dip and rise yesterday as expected, though the bears tried to breach the 6550 level, hitting S1 at 6533 instead, before the bulls came charging back. They managed the upper resistance at 6620 before running out of steam, but a lot of the rise was thanks to Putin saying that he wasn’t going to risk a military conflict with the West. Its a fairly big today with Yellen and the Fed takingcentre stage, and the associated taper announcement. They are in the tricky position of continue to taper and thus sending the message that the financial system is in rude heath, but data suggests otherwise; or no taper again and they think its not quite so robust! In the UK we also have our budget today, the theme of which I expect will be pro business, recovery going well, and plans on track but not out of the woods yet. Along those lines anyway!
Asia Overnight from Bloomberg
Asia’s benchmark stock gauge fluctuated as investors weighed the prospect of further sanctions against Russia and awaited the Federal Reserve’s policy statement. Japan Display Inc. sank in its trading debut.
The MSCI Asia Pacific Index rose 0.2 percent to 135.34 as of 1:12 p.m. in Hong Kong, after falling and rising as much as 0.4 percent earlier. The U.S. and Europe pledged more sanctions against Russia while President Vladimir Putin, pushing to annex Crimea, said his country didn’t intend to further split Ukraine. The Federal Open Market Committee will end a two-day policy meeting today, after data yesterday indicated the U.S. home-building industry is stabilizing.
“Investors still remain highly cautious,” Matthew Sherwood, who helps manage about $25 billion as the Sydney-based head of investment markets research at Perpetual Ltd., said by phone. “Risk assets have recovered most of their lost ground since the Ukraine crisis was sparked a few weeks ago but there’s still a lot of volatility. The Fed will probably water down their forward guidance and keep U.S. interest rates low for at least another 18 months.”
Fed Tapering
The Fed will press on with cuts to its asset-purchase program and switch to qualitative guidance for assessing interest rates, according to economists surveyed by Bloomberg. The FOMC will further scale back its bond-buying at the meeting, reducing purchases for the third time by $10 billion to a $55 billion monthly rate, according to the survey done from March 14-17.
US Futures
Futures on the S&P 500 were little changed today. The U.S. benchmark index climbed 0.7 percent yesterday as housing data bolstered confidence in the economy.
A Commerce Department report showed housing starts were little changed in February after declining less than previously estimated a month earlier, indicating the home-building industry is stabilizing after bad winter weather curbed construction. Permits filed for future projects increased 7.7 percent to a 1.02 million pace in February, the most since October.
Russia
Russia cemented its claim to Crimea as Putin showed no sign of backing down in the standoff over Ukraine’s breakaway Black Sea region, prompting Western leaders to vow further sanctions this week.
Leaders of Poland and Estonia, two of the countries on the front line of turmoil in Ukraine, told U.S. Vice President Joe Biden they want a more aggressive stance toward Russia. Biden is on a two-day trip to the region aimed at assuring North Atlantic Treaty Organization allies that the U.S. will support them against any attempt by Russia to encroach on their territory.
FTSE Outlook
I am still bullish for the moment and think the market is heading up for the moment. As such if the price dips to the support levels today at 6555 and before that 6580. The only slight concern I have is that we are still testing the top of the 10 day Bianca channels at 6594, and the 20 day Raff at 6625. However, we could be seeing a bullish breakout if that 6625 is exceeded as well, with a rise to 6670 likely (top of the Bianca 20 day).
I don’t expect Yellen to do anything to spook the market today and Osborne’s budget should be fairly upbeat (they are purely focussed on winning the GE in 2015 so will not want to upset the apple cart to stay in with a shout).
With support at 6689 with the daily pivot and a slightly more round number at 6580 I think any initial dip to that area will be a decent buying opportunity, though the EMAs on the 30 minute chart are still in a bullish mode (just).