Still cautiously bullish…. till next week anyway!

Good morning, well retail sales coming in under forecast yesterday set the cat amongst the pigeons and caused a few jitters, as its feared that the “recovery” might not be all that strong after all. I am still thinking of the following bigger picture –  a little bit more upside from here then a decline early November before a Christmas rally kicks in towards the end of November. That said, the bulls weren’t exactly charging off the support levels yesterday, around the 6710/20 area and we have dropped back to that level overnight. With the 10 day Bianca channel still narrow, and the bottom at 6714 the bears are still knocking! 42 companies are reporting earnings in the US later today which will generate some movement! Among the 256 companies which have reported already since Sept. 30, 76 percent beat earnings estimates while 54 percent exceeded sales projections (from Bloomberg).

Asia Overnight from Bloomberg

Shares in Asia fell, paring the benchmark index’s first back-to-back monthly advance since April, as the Federal Reserve starts a two-day policy meeting. Australia’s dollar dropped to a two-week low after the central bank said the currency may weaken, and metals declined.

The MSCI Asia Pacific Index slid 0.3 percent to 142.26 at 3:22 p.m. in Tokyo while the Shanghai Composite Index fell to an eight-week low after the size of a central bank cash injection disappointed the market. The so-called Aussie declined against all 16 of its major peers. Standard & Poor’s 500 Index futures decreased 0.1 percent as Apple Inc.’s stock fell in after-hours trading. Copper and lead lost at least 0.4 percent, snapping three days of gains.

The Fed starts a two-day meeting today to consider whether to start trimming its $85 billion-a-month of bond purchases which have buoyed emerging-market assets globally. Reserve Bank of Australia Governor Glenn Stevens said the nation’s terms of trade are likely to worsen and its currency may be “materially lower” than current levels. The People’s Bank of China added 13 billion yuan ($2.13 billion) into the system via the first reverse-repurchase operations in two weeks.

“We’ve had such a good run in equities and this is a fairly healthy correction,” said Adrian Zuercher, a global strategist at Credit Suisse (Hong Kong) Ltd., part of the Swiss bank’s asset-management unit that oversees about $433 billion. “U.S. data is showing some impact of the government shutdown and our best guess is that markets are in consolidation mode for now.”

Earnings Season

The S&P 500 rose 0.1 percent in New York yesterday to close at a record high. Shares of Apple (AAPL), the world’s most-valuable company, traded at $523 after the official market close versus their $529.88 finish in New York.

Apple said revenue in the current period will be $55 billion to $58 billion. While that topped the $55.5 billion average of analysts’ estimates, it represents a modest increase from the $54.5 billion reported a year earlier. Gross margins will be 36.5 percent to 37.5 percent, Apple said, versus the 38 percent analysts estimated.

FTSE Outlook

ftse 100 dip and rise
ftse 100 dip and rise

Today’s pivot is 6723, pretty much where we are as I write this. 6740 is today’s line in the sand – the bulls will be keen to break that to test higher levels, maybe even 6800. However, on the flip side, a break of 6700 flashes some warnings and could lead  to 6670 and then lower. Once the daily channels (raff and Bianca) start breaking then there is going to be quite strong downward momentum. As I mentioned at the beginning of this email, I do think we have a little bit more bull left in the tank, and then the declines are more likely to start next week. we are having a bit of consolidation currently, hopefully for a little bit more of a push higher. The 6700 level has held a couple of tests on the 25th and the 28th October, and I think it might hold just a while longer. Initially this morning it does seem to be holding up ok, though I have plotted an initial dip, mainly based on the fast that he coral is red, and the EMAs are bearish. There is a ProTrend resistance at 6731 which is where I think it might initially dip from. If the price can get above the 6740 level then we should have a few more positive sessions remaining.