Good morning, hope you had a good weekend. WWW3 hasn’t broken out yet over Syria but still a lot of talk and Obama faces Congress on Tuesday which will determine the next steps. Might be a tough sell though as generally most seem war wary and action might not prove popular with Joe Public. Good news on the UK economic front though which seems to be showing decent growth and will be talked up by Osborne later. Fridays prediction played out perfectly which was nice, always good when it does it so well. The high of 6565 saw a great drop to the 200 EMA area at 6495. The Dow saw a massive move at the same time though with a drop of 200 then a bounce of the same amount! Since Fridays close, we have had news out of China of increasing exports, and a better than expected Japanese GDP figure at 3.8% for Q2, which sees the FTSE looking to open at about 6560.
The headlines in the mainstream media are all getting pretty upbeat currently which is usually a bit of a warning sign that we are about to get a drop in the markets. I expect that we will have one more dip shortly as we are still at the top or near the top of the various daily channels. However, I still think we will end the year fairly positively, and still think around the 6800 area is likely, probably after a dip to 6200 or something around there.
Asia Overnight from Bloomberg
Asian stocks rose, with Japan’s benchmark index reaching a one-month high, and the yen weakened after Tokyo was selected to host the 2020 Olympics. Metals rallied and the won gained on improving Chinese exports and easing concerns over a reduction in U.S. stimulus.
The MSCI Asia Pacific Index climbed 1.1 percent by 12:40 p.m. in Hong Kong, rising for an eighth day. Japan’s Topix Index (TPX) jumped 2.1 percent, while the Shanghai Composite Index surged 3 percent. Standard & Poor’s 500 Index (SPX) futures added 0.3 percent. South Korea’s won and the Malaysian ringgit strengthened more than 0.4 percent, while the yen sank 0.6 percent to 99.68 per dollar. Copper rose a second day.
The Olympics will spur construction and help overcome deflation, Japan’s Prime Minister Shinzo Abe said yesterday, before data today showed the economy expanded more than initially estimated. Chinese exports grew more than economists projected last month, while a smaller-than-expected increase in U.S. nonfarm payrolls alleviated concern over the potential size of Federal Reserve stimulus reductions. “There’s expectations the Olympics is going to support Japan’s economic recovery,” said Toshiyuki Kanayama, senior market analyst at Tokyo-based Monex Inc. “The gain in gross domestic product is going to be an added catalyst.”
The Hang Seng China Enterprises Index jumped 2 percent and the Shanghai Composite Index headed for its highest level since June 7 after customs figures showed yesterday Chinese exports rose 7.2 percent in August from a year earlier, beating the median estimate of a 5.5 percent gain in a Bloomberg survey. “Investors are getting more confident about the economic data,” said Mao Sheng, an analyst for Huaxi Securities Co. in Chengdu. “Stocks will be steadily rising for the rest of the year.”
The number of workers on U.S. payrolls rose by 169,000 last month, less than the 180,000 median forecast of economists surveyed. The Fed will cut Treasury purchases to $35 billion from $45 billion after a Sept. 17-18 meeting, while maintaining mortgage-bond buying at $40 billion, according to the median of 34 responses in a Bloomberg survey released on Sept. 6.
6568 (Fridays high) is the line in the sand for today and if broken then we should get the rise to 6600, possibly 6630. 6565 is also the top of the 20 day Bianca channel with the 10 day at 6587 so the bulls still have a few resistance levels to get through, however we have been testing the top of the Bianca channels for a few sessions now, so we might see a break above shortly. That would then lead into the daily Raff channels, with the 20 day at 6606 and the 10 day at 6625.
As mentioned above the press is getting all bullish about the economy and good data coming out but as the stock market tends to look 6 months ahead (so they say) that data is probably already priced in. Therefore a bullish press flags a bit of a warning sign, and coupled with the fact that we are challenging the daily channels makes me a bit wary of a big bull push.