Morning all. I am back in the land of the living today and thanks for the emails. Shame to miss yesterday as the short from the 6474 area looked like a stunning call in the end good for a 50 point drop pretty much. Glad to hear some of you got on it though but apologies I wasn’t able to SMS that one. The US situation is still at a log jam, though interrupted briefly by a woman in a car ramming a Congress security barrier – got the bears excited for a brief spell but soon recovered as news broke. Bit weird as she had a 1 year old in the back so must have just flipped out. While the US impasse continues I expect it will still be bearish, and it fuels worries that they might not raise the debt ceiling in time for the 17th October, which if they don’t will mean a default on US debt, which is unprecedented and won’t be good. The IMF have urged them to sort it out and stop their political infighting. Christine Lagarde said, “The government shutdown is bad enough, but failure to raise the debt ceiling would be far worse, and could very seriously damage not only the US economy, but the entire global economy,” she said. “So it is ‘mission-critical’ that this be resolved as soon as possible.” Maybe they are going to bundle a solution to both into 1 and we will then get a rally, maybe after the S&P hits 1660/1665. Dow hasn’t been in a rush to regain 15000 either. Either way, failure to resolve either and both these issues is not good and will jeopardise the tentative “recovery” that we all keep hearing about – will they risk that? I doubt it. But as per usual its just politician’s playing to get as much as they can for them and their side as the real issue drags on. Ideally someone would just bash their heads together and we can all move on!
Asia Overnight from Bloomberg
Asian stocks fell, with the regional index heading for its first weekly loss in more than a month, as concern grew that the U.S. political impasse could lead to the government defaulting on its debt. The MSCI Asia Pacific Index lost 0.2 percent to 139.25 as of 2:21 p.m. in Tokyo as seven of the 10 industry groups on the gauge fell. U.S. President Barack Obama canceled plans to attend two economic summits in Asia next week as the fiscal standoff with congressional Republicans kept the U.S. government partially shuttered for a third day.
“Creeping worries about the U.S. debt ceiling are starting to unnerve investors,” Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington, wrote in an e-mail to clients. “Expect more whippy and nervous trading.”
The Asia-Pacific gauge is set for a 1.1 percent drop this week as the failure of U.S. lawmakers to avert a government shutdown fueled concern they won’t be able to agree on raising the nation’s $16.7 trillion debt limit later this month. The Treasury Department warned that a federal default could lead to a recession as bad as the 2008 financial crisis or worse.
Futures on the S&P 500 slipped 0.1 percent today. The gauge declined 0.9 percent yesterday, the most in a month, as Treasury said the government will run out of borrowing authority Oct. 17, leaving only cash to pay the bills.
“Not only might the economic consequences of default be profound, those consequences, including high interest rates, reduced investment, higher debt payments and slow economic growth could last for more than a generation,” the Treasury said in its report.
“In the event that a debt limit impasse were to lead to a default, it could have a catastrophic effect on not just financial markets but also on job creation, consumer spending and economic growth — with many private-sector analysts believing that it would lead to events of the magnitude of late 2008 or worse, and the result then was a recession more severe than any seen since the Great Depression,” the department said.
A report yesterday showed fewer Americans than forecast filed applications for unemployment benefits last week. Jobless claims rose to 308,000 in the week ended Sept. 28, from a revised 307,000, the Labor Department said. The median forecast of 50 economists surveyed by Bloomberg called for an increase to 315,000.
U.S. payrolls data won’t be released as scheduled today because of the government shutdown. The department said that an alternative date for the September payrolls report and jobless rate hasn’t been scheduled.
“The absence of the U.S. jobs data creates uncertainty, which is reflected generally in greater equity market volatility,” said Chad Padowitz, Melbourne-based chief investment officer at Wingate Asset Management. “The longer the current situation holds, the less information people know about what’s happening in the underlying economy.”
Today’s pivot is 6452 so I expect we may get some resistance there initially. The daily trends are all down and as with the DAX, a failure to resolve the US situation is going to drag on things. The 200ema on the 30minute chart is 6455 which may act as resistance also, so I think a short around this area could pay off. We have the bottom of the 2 Bianca channels as viable support areas – 6403 and 6367, with the top of the 10 day at 6489 likely to gap any bullish exuberance. With the price looking at opening below 6432 I think we will dip to the fib pivot area at 6411 then an initial bounce which may or may not get as far as the 200ema. Looking at the S&P I think it might dip to the 1660/65 area today, and then bounce which may coincide with an announcement on resolving the current standoff. Who knows with the US though! The 30 minuet FTSE EMAs are still bearish currently which is why I think we will dip a little further before a climb to the 200ema. There are a few resistances around the 6435 area too in terms of safezone, 25EMA and coral so it might struggle to break that area.