Good morning. Who knew eh, to stop the declines all Turkey had to do was double interest rates and cause an out of hours rise. Ha ha! On a more serious note the bottom of the 20 day Raff channels have held, having been hit this week on the Dax, S&P and FTSE, so we could actually get a decent rise again now. For today initial resistance is at 6640, 6660 then 6680 – nice pattern of numbers there! Of course its Fed day today (7pm this evening UK time) and the most asked question of the week should be answered with regard to tapering. As mentioned yesterday it’s a coin flip. Taper and it means the Fed still think the economy is on the right track, which could be good for equities, don’t taper, and shows they were spooked by recent poor data and last week’s falls, thus is the “recovery” still weak. You can actually spin it any number of ways so rather than guess, its probably easier to wait till tonight! I do think we might be in for some bullish sessions now, with gold falling again and the daily trend lines holding.
Asia Overnight from Bloomberg
Emerging-market currencies rose, led by the lira’s biggest jump since 2008, and Asian stocks rebounded after Turkey boosted interest rates to stem capital outflows. Treasuries retreated before the Federal Reserve is forecast to cut monthly bond purchases today.
The lira surged 3.9 percent to 2.1682 per dollar as of 2:58 p.m. in Tokyo. South Korea’s won jumped the most in four months, spurred by a record current-account surplus, while the yen weakened versus all 16 major peers. The MSCI Asia Pacific Index of stocks climbed 1.5 percent and futures on the Standard & Poor’s 500 Index gained 0.5 percent. Ten-year Treasuries and gold fell for a third day, while rubber futures exited a bear market and Asia bond risk dropped.
Turkey’s decision was announced at midnight local time and followed an unexpected increase in India’s interest rates yesterday. BlackRock Inc. (BLK) said the moves will help restore investor confidence after a rout in developing-nation currencies and a $1.87 trillion selloff in global stocks in the week through Jan. 27. The Fed concludes its last meeting today under Chairman Ben S. Bernanke, with economists projecting a second $10 billion cut to its monthly bond purchases.
What happened in Turkey “was a really aggressive move and there will be ongoing pressure for other emerging-market countries to raise rates as well,” Nader Naeimi, the Sydney-based head of dynamic asset allocation at AMP Capital Investors, which manages $131 billion, said by phone. “It sets a precedent. You’ll get more of a clear separation between countries with strong foreign-currency reserves and strong current-account balances, and the rest of emerging markets.”
The Fed said in December that it would begin to pare the pace of its monthly bond buying by $10 billion to $75 billion this month. The central bank will cut purchases by $10 billion at each of the next six FOMC meetings, with the program ending no later than December, according to a Bloomberg survey of economists that was published Jan. 10.
The S&P 500 rose 0.6 percent yesterday, rebounding from a three-day drop, as companies ranging from Pfizer Inc. to DR Horton Inc. reported better-than-expected earnings and data showed a pickup in U.S. consumer confidence.
Facebook Inc., Boeing Co. and Dow Chemical Co. are among more than 20 companies reporting their earnings today. Of the 153 companies in the S&P 500 that have announced their results this season, 76 percent beat profit estimates while 67 percent exceeded sales forecasts, according to data compiled by Bloomberg.
I am thinking a dip and rise today. The bulls will be buoyed by the 20 day Raff channel holding, and the emerging market panic seems to have calmed down a bit now. of course most of the action will take place this evening around 7pm and Fed time. We are back above the daily pivot at 6571, so I expect the dip to go there and then a bounce towards 6590 which if broken will open up 6640 and 6680 ultimately. If that pivot and the bottom of the 30 minute channel break, then 6555 is the next support then 6522. Back down at those levels would be quite good entries for longs as I do think we are about to get another climb up. however there are bigger falls coming I am sure, I still think that weekly scenario with the drop to 6000/6200 will come to pass by the end of Q1.