Good morning. Fortunately the 6700 level held yesterday and the bulls managed to a rise to 6745 from there. I thought that 6720 was going to put up a bit more of a fight on the drop but didn’t seem to so the market probably wanted to take out some stops. For today, to push to the 6760 area mentioned yesterday we will need to break that 6745 high from yesterday. More woe on the UK high street yesterday with Barratts and Blockbuster going into administration again, though they have been on the ropes since 2008 to be honest. The latter has probably just been asset stripped since being purchased from administration in March.
Official figures today are expected to show the consumer price inflation rate down to a six-month low of 2.5pc, followed by another appreciable fall in unemployment on Wednesday.
Asia Overnight from Bloomberg
Asian stocks rose, led by Japanese shares, as the yen weakened against all its major peers. Crude and gold declined, while U.S. 10-year Treasury yields touched the highest level in seven weeks.
The MSCI Asia Pacific Index added 0.5 percent as of 2:35 p.m. in Tokyo. The Topix index advanced 1.4 percent while Standard & Poor’s 500 Index (SPX) futures gained 0.1 percent. The yen slid 0.4 percent to 99.56 per dollar while the Philippine peso weakened to the lowest in a month. Yields on 10-year U.S. sovereign debt touched 2.77 percent, the highest since Sept. 20. Gold lost 0.4 percent and silver headed for a three-month low, while West Texas Intermediate crude fell 0.3 percent.
Treasury yields rose as trading resumed after a holiday. U.S. debt with maturities longer than 10 years has slid 11 percent this year, on track for the largest loss among 144 indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies, as stronger-than-expected economic data added to the case for the Federal Reserve to reduce asset purchases.
I think there might still be a little fuel left in the tank for a push to the higher targets at 6759 and possibly 6790 mentioned yesterday but it feels like the tide is starting to turn a little bit more in the bears favour. The 10 day Bianca channel is heading down and with the channel top not too far above were we currently are at 6742, and with yesterday’s high at 6745 the bulls have a bit of a job on their hands to break that area. If they do then 6759 is likely to be hit. Looking across the pond, the S&P has/had resistance at 1773 which it hit yesterday and dipped from, although not a lot. 1778 is a more major resistance to watch. If the Dax is going to go for 9180, and the S&P 1778, then with any luck the FTSE will go for the 6759 as well. there is a plethora of news out this week which is going to affect markets and expected to paint an improving economic picture here in the UK. As markets look 6 months forward (so they say anyway) this current crop of data is mostly priced in and is the reason for the buoyant prices over the past 6 months. The question remains, is this the Santa Rally and we have had the dip when we saw 6645 last week or is there a dip still to come? Looking at the daily chart with the 10 day Raff at 6790, and the 10 day Bianca at 6742 I think we are starting to level off, though its only 6 weeks till Christmas so the bulls won’t have that long to rally if we do dip for a few weeks. That said, the 20 day Bianca is still rising and has support at 6695 so the bulls are not fighting a losing battle just yet.
So I am still expecting a little bit more bullishness, especially as they managed to fight back from the 6700 level yesterday, though be ready for the bears to suddenly appear.