And the next thing…. Debt raises its head

Good morning. Main news over the weekend is focussed on the USA and the budget stalemate, where its looking likely the US government might actually shut down for a day. After the tapering debacle and the will they, won’t they, we now move onto the next, being the debt ceiling and will they won’t they increase it. Got to love the yanks! It certainly seems to have spooked markets anyway opening quite sharply down this morning compared to Fridays close. However it will probably be the usual story of taking it to the wire in a show of brinkmanship just as they have been doing previously. Dax has hit the 8600 support area and is looking like it might bounce a little from there, but the next support is 8571. S&P has hit 1680 where there is a little support, and the FTSE has hit the bottom of the 20 day Raff and also a support level I have at 6440. So, there is a possibility that we get a little bounce from here as 3 main indices are all hitting support areas that I have on my charts.

Asia Overnight from Bloomberg

Asian stocks fell, with the benchmark index paring its biggest monthly gain since 2012, on concern the U.S. government is headed for a shutdown amid a budget stalemate.

The MSCI Asia Pacific Index dropped 1.1 percent to 139.33 as of 1:43 p.m. in Tokyo, with all 10 industry groups on the gauge falling. It’s headed for a 7 percent increase this month, the most since January 2012, and is up 6.8 percent this quarter. Even if Congress resolves the budget fight by the Oct. 1 deadline, U.S. lawmakers would move to the next fiscal dispute over raising the $16.7 trillion debt ceiling.

“There’s no agreement among the government at the moment, and if they can’t agree on the budget, there’s no way they are going to agree on the debt ceiling,” said Andrew Sullivan, director of sales trading at Kim Eng Securities in Hong Kong. “It’s the end of quarter and so you may see people looking to sell into the recent strength, locking gains, on expectations the U.S. government does shut down.”

The September gains pushed valuations on the Asia-Pacific measure to 13.7 times estimated earnings as of Sept. 27 from 12.7 at the end of August, according to data compiled by Bloomberg. That compares with 15.4 for the Standard & Poor’s 500 Index and 14.3 for the Stoxx Europe 600 Index, the data show.

Budget Impasse

Futures on the S&P 500 Index slipped 0.7 percent today after the gauge declined 0.4 percent on Sept. 27. Congress is leaving itself just one day to end a budget stalemate that raises the risk of the first government shutdown in 17 years.

The House of Representatives voted 231-192 yesterday to stop many of the Affordable Care Act’s central provisions for one year, tying it to an extension of U.S. government funding through Dec. 15. Should the Senate reject the bill today the government could be shut down from tomorrow.

More info here

Outlook

ftse 100 prediction
ftse 100 prediction

Looking at the S&P to start with I have 1680 and 1671 as supports, coupled with the Dax support mentioned above at 8530 I think we will dip a bit further across the board but then possibly have a bounce, on the FTSE probably from the 6405 area where we have the 200ema on the daily chart and Fib 4 on the 30minute (pink line). Initially I have put in a climb as I think the initial supports will hold but then break later in the day, but I think we can say that 6404 will be seen today as markets will be spooked by the US situation. Again. Its certainly going to be choppy today anyway, even more so this afternoon when the US comes online. I have also got Dow support at 15110 which is looking likely to get hit!