Good morning. Yesterday’s trading plan worked out pretty well with the dip to the 6640 level though it did take a while. A bounce there that still seems to be going as the FTSE has held up overnight makes me think that we will see the 6702 area mentioned today instead. There is also a chance of slightly higher and with the 10 day Bianca channel top at 6713 then that’s likely. Top resistance I have is 6735. We didn’t quite drop all the way to the 6630 to trigger the order long set at that level, but the rise did coincide with incoming Fed Chairman Yellen yet again saying that stimulus is here to stay for a while. Not great data for France yesterday with output falling and Hollande’s ratings falling faster than a dropped baguette to 15%.
A morning prayer for you all – Our Fed, Who art in Washington, Yellen be thy name, Thy printing come, Thy will be done by Ben as it is with Janet, Give us this day our daily billion, and increase our debts, As we bail out our debtors, And lead us not into inflation, But deliver us from down markets, For thine is the printing, the bubble and the euphoria, Forever till taper. Amen
[Not sure where this came from but one of the members posted it in the chat room and it seemed quite amusing!]
Asia Overnight from Bloomberg
Asian stocks headed for the first weekly gain in a month after Federal Reserve chairman nominee Janet Yellen said she would continue U.S. stimulus and amid speculation China will release detail of economic reform.
Japan’s Nikkei 225 Stock Average (NKY) surged beyond 15,000 for the first time since May, rising 1.9 percent and on course for its biggest weekly gain since December 2009. China’s CSI 300 Index jumped 2.9 percent, heading for its biggest increase in two months, amid optimism detail of policy changes decided at a Communist Party plenum will be released next week.
The MSCI Asia Pacific Index added 1.3 percent to 141.53 as of 12:47 p.m. in Hong Kong, extending this week’s advance to 1.8 percent. The gauge is set to snap three weeks of declines, the longest set of such losses since June. All 10 industry groups on the measure rose. Today’s surge in Chinese stocks reversed a slump on Nov. 13 when a lack of details from the leaders’ plenum disappointed investors.
“The pendulum has swung to the positive side after the disappointment with the plenum and that’s coming with all the good news about the Fed stimulus outlook,” Adrian Zuercher, a global strategist at Credit Suisse (Hong Kong) Ltd., part of the asset-management unit of Credit Suisse Group AG that oversees the equivalent of $404 billion. “Any policy changes are going to be in the right direction and improve market stability.”
Morgan Stanley said yesterday it expects China to outline economic reforms in the next seven to 10 days and that investors’ earlier concerns had been misplaced.
Futures on the S&P 500 added 0.2 percent today. The measure gained 0.5 percent to a record yesterday. Asked yesterday about stock prices, Yellen said she doesn’t see “bubble-like conditions.”
“Stock prices have risen pretty robustly, but if you look at traditional measures” such as price-earnings ratios, “you would not see stock prices in territory that suggests bubble-like conditions,” she told the Senate Banking Committee in Washington.
The S&P 500 has rallied more than 25 percent this year, putting it on pace for the best annual gain in a decade. The gauge has rebounded 165 percent from a 12-year low in March 2009, adding more than $10 trillion in market value.
Yellen & QE
“I consider it imperative that we do what we can to promote a very strong recovery,” Yellen said in response to a question during her testimony. “It’s important not to remove support, especially when the recovery is fragile and the tools available to monetary policy, should the economy falter, are limited given that short-term interest rates are at zero.
Yellen “provided a staunch defense about the use of asset-purchase programs and stated that U.S. Fed policy would remain in place while the U.S. economy remains fragile,” Matthew Sherwood, head of investment markets research in Sydney at Perpetual Investments, which manages about $25 billion, said in an e-mail. “This wasn’t just music to the ears of stimulus hungry investors, it was like listening to Beethoven’s Ninth Symphony.”
Initially I think that the 6887 area will hold as resistance after the bounce we saw yesterday from 6640 as we have a declining 30 minute channel there. If the price can hold above 6673 then we should get the 6702 area mentioned yesterday today, however, whilst we are at this level (6700) I am more inclined to start thinking about shorting the rallies. The US is at record levels, and they may want 16000 on the Dow if nothing else but for the positive headlines (brainwash the masses), and possibly 1800 on the S&P. Hasn’t QE done well to cure all the financial ills! If the 6738 breaks today to the upside then after that the next major resistance is 6845. I expect yesterday’s bull to carry on, at least initially today.