Good morning. An interesting day yesterday that did end up bouncing off the lower area at 6393 (actual low was 6390) before the rise stalled at 6440. It took a while to dip to the buy area though and didn’t look like it was going to do it as it took until the US came online till it hit. Anyway, now it doesn’t look too negative a picture, and the S&P held the 1625 area in the end as well. Further strength in that above 1644 would set in motion a decent bull run. However, should the 1627 (yesterday’s low) area break then we could see 1615 (where there is a ProTrend support line on the daily) or possible 1585 which are the 2 channel bottom areas on the daily. I am looking at the S&P right now mainly due to that providing some clarity over the Syria situation, as frankly, anything there will be US led. I have highlighted the channel bottoms with the red lines.
Syria situation is still at the forefront though Cameron has had to back off a bit following opposition to his rather too eager willingness to jump in all guns blazing. At the end of the day it should be up to the UN to be the global police really. Anyway, looking back to the FTSE, and looking at the daily trends they are turning up a bit, particularly the 10 day Raff – showing that a bit of optimism might be creeping in – though the trend is still down. We didn’t reach my upper target area from yesterday, instead stalling at 6440, as per the update email I sent round – 6440 needed to break to see 6490.
Asia Overnight from Bloomberg
Asia’s benchmark stock index rose from a two-month low as energy shares increased after concern military action against Syria will disrupt global oil supplies fueled gains in crude prices this week. The MSCI Asia Pacific Index rose 0.7 percent to 130.04 as of 2:23 p.m. in Tokyo, with eight of the 10 industry groups gaining on the gauge, which yesterday fell to the lowest close since June 27. The measure lost 2.4 percent this month through yesterday, wiping out all its 2013 increases. Investors also are awaiting a report on U.S. economic growth that may give signs on when the Federal Reserve will start paring stimulus.
“I suspect we will see some stabilization today, but there’s still a lot of caution because the problem is not just Syria,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which oversees $131 billion. “There’s a combination of fears that the U.S. Federal Reserve will start paring monetary stimulus and at the same time underlying fundamentals in Asian countries are looking less attractive than they have for many years.”
Investors are watching the Middle East after the U.S. and the U.K. yesterday said they are prepared to take military action against Syria, without authorization from the United Nations Security Council, after the concluding the regime was responsible for a chemical weapons attack against civilians on Aug. 21.
Futures on the Standard & Poor’s 500 Index (SPX) were little changed after the measure rebounded 0.3 percent yesterday from an eight-week low ahead of a report today on second-quarter U.S. economic growth. Economists surveyed by Bloomberg project gross domestic product expanded 2.2 percent in the second quarter, up from the government’s earlier estimate of 1.7 percent.
“We’re looking toward the U.S. GDP number to gauge the mood for tapering,” said Evan Lucas, a market strategist at IG Ltd. in Melbourne. “A positive read would suggest tapering is coming, but a bad number will hold it off, and that’s why at the moment there’s isn’t a huge direction coming out of the macro economic data to suggest what will happen at the September meeting.”
If we stay above the pivot (6421) and 6430 then 6440 is the key area and I have a possible 6461 on the cards. The bulls will need to hold above 6393 today (yesterday’s low) to maintain some momentum, but if broken then the 6338 level mentioned previously is likely to be hit. Longs there should be good. Today’s big news is the US 2Q GDP figure at 13:30, forecast to be 2.2%.
I expect the little bullish run to continue this morning 6440 or 6461, possibly 6490. I have drawn the arrows to the former. Both the 10 and 20 day Bianca channel tops are around the 6490 area so I think the bulls will have a hard time breaking through there just now, and a flush to the lows is likely. If we do dip again 6393 will be key. I will go for another long there but am keeping tight stops on the trades off the identified levels. We are still within the 30 minute channel the top of which is 6445, bottom 6400. Breaking of that 30 minute channel could see a high of 6490 and a low of 6338.