Good morning. If we get a Santa Rally this year you just know its going to suddenly appear, but probably after the Fed meeting next week. unfortunately the long yesterday off the 6470 support area soon gave up the ghost and we dropped down to the 76% fib line on the Bianca chart you can see below. This is from the most recent lowest low to the most recent highest high. Without wishing to tempt fate, despite a slight overshoot to 6425, the FTSE has bounced up a little from there. That level also coincided with the bottom of the 20 day channel yesterday. Bad jobs news yesterday saw a rise as it was seen as good, as it means tapering might not come that soon. Be good once there is a committed timetable and future for tapering, however, I still think it’s a couple of months away.
Asia Overnight from Bloomberg
Asian stocks fell, with the regional benchmark index extending its second weekly loss, as improving U.S. economic data boosted bets the Federal Reserve will reduce stimulus as early as next week.
The MSCI Asia Pacific Index dropped 0.4 percent to 137.59 as of 2:03 p.m. in Hong Kong, with nine of the 10 industry groups on the gauge declining. The measure is heading for a 1.4 percent drop this week. Japan’s Topix (TPX) index lost 0.3 percent and the Nikkei 225 Stock Average advanced 0.4 percent as the yen touched 103.84, the weakest since October 2008.
“With the prospect of tapering only days to weeks away, the global effect is starting to ramp up,” Evan Lucas, Melbourne-based market strategist at IG Ltd., said in an e-mail. “The unwinding of unconventional monetary policy is a good thing in the long term, however it will cause short-term vibrations.”
The Topix rose 44 percent this year through yesterday, the most among 24 major developed markets tracked by Bloomberg, amid unprecedented stimulus by the Bank of Japan in support of Prime Minister Shinzo Abe’s efforts to end 15 years of deflation.
S&P Futures
Futures on the Standard & Poor’s 500 Index rose 0.2 percent today. The measure fell 0.4 percent yesterday after a report showed retail sales rose more than forecast in November as Americans bought cars and took advantage of discounts going into the holiday-shopping season.
A separate report indicated applications for unemployment benefits jumped last week from an almost three-month low. The Bloomberg Consumer Comfort Index advanced for a third straight week as Americans grew more optimistic about the economy.
Fed Meeting
Data last week showed the U.S. jobless rate fell to a five-year low and the economy expanded in the third quarter at a rate faster than initially estimated.
The Fed will probably start reducing its $85 billion of monthly bond purchases at its Dec. 17-18 meeting, according to 34 percent of economists surveyed Dec. 6 by Bloomberg, up from 17 percent in a Nov. 8 poll.
The U.S. House passed the first bipartisan federal budget in four years, which would ease $63 billion in automatic spending cuts and avert another government shutdown. The legislation now heads to the Senate. The House voted 332-94 for the $1.01 trillion compromise budget crafted by Senator Patty Murray and Representative Paul Ryan, the chairman of a special bipartisan panel. President Barack Obama said he’ll sign the final measure.
FTSE Outlook
The declines all look a bit stage managed (pure conjecture on my part) rather than fast rapid declines that would get the media in a froth and the BBC an excuse to get their big red arrows out again. This way we have a correction before the rally, and reduces the “overbought” status that everyone was talking about when we were at 6700.
We have a fairly decent 30 minute channel at the moment, which has resistance at the 6480 area. Any move above 6480 could get to 6517 but with the trend down and buyers unlikely to be rushing in ahead of the fed meeting I think a dip from that level is more likely. I wouldn’t get really bullish till 6573 is broken, which is the top of the 10 day Raff.
I have plotted my preferred plan with the blue arrows, though its possible that the pink one plays out if that rising support line holds.