Good morning. I am now short at 6832, with yesterday’s short order having taken whilst I was having dinner. I have widened the stop to 6855, just above todays 10 day channel top. I am in 2 minds with this short now as the FTSE held up pretty well yesterday and found good support at 6810 in the end. I was hoping for a dip to a little lower as you know to reload a long, which hasn’t played out. The FTSE seemed quite resilient, as the Dow wasn’t full of strength yesterday and actually had a bit of a wobble at the end of its session, dipping below 16400. You could argue that its just the FTSE playing catch up as the US and Dax have been quite strong while the FTSE plodded along.
Asia Overnight from Bloomberg
The dollar headed for its biggest weekly gain in two months against major peers, while Australian bonds rallied the most since December. Asian stocks fluctuated before China reports economic data next week.
Chinese factory output and investment growth probably slowed in December, data on Jan. 20 may show, adding to signs the world’s second-largest economy is losing momentum. Morgan Stanley and General Electric Co. are among companies reporting earnings today after Citigroup Inc. (C)’s profit trailed estimates. Federal Reserve official Jeffrey Lacker is set to speak in the U.S., where data this week showed jobless claims falling and retail sales beating estimates as the Fed pares stimulus.
“The Fed will continue tapering,” said Andy Ji, a Singapore-based currency strategist at Commonwealth Bank of Australia. “This week we had a bunch of data out of the U.S. showing that the improving trend hasn’t really changed.”
The greenback has surged 2 percent this week against the Australian dollar and rallied 2.2 percent versus South Africa’s rand.
Jobless Claims
Initial claims for U.S. jobless benefits retreated last week to the lowest level since November. Fed policy makers said on Dec. 18 they will cut monthly bond buying to $75 billion from $85 billion, citing an improving labor market. Lacker, who doesn’t vote on monetary policy this year, said on Jan. 10 that he “would expect a similar reduction in pace to be discussed at the upcoming meeting.”
The Federal Open Market Committee will reduce purchases by $10 billion at each meeting to end the program this year, according to the median forecasts of economists in a Bloomberg survey. It next meets Jan. 28-29.
Economic Slowdown
Chinese industrial-production gains slowed to a five-month low of 9.8 percent and gross domestic product grew 7.6 percent from a year earlier in the October-December period, based on the median estimates of analysts before data due Jan. 20. Expansion will moderate to 7.4 percent this year as investment slows and overcapacity is squeezed, according to a survey last month. Home-price data are due tomorrow.
FTSE Outlook
As mentioned above my short order from yesterday’s trade plan has fired, entering at 6832, though I must admit it does feel a little bit suspect! As you know I was planning for a dip and then rise yesterday, but we didn’t really dip, and in actual fact it was quite a boring day with a 20 point range, thus generating no really decent signals. As they say – if in doubt, stay out – so no scalps or anything yesterday.
I think today we will get some resistance at 6848 as 6850 has been a longer term resistance for a while. I am in two minds about this short at 32 now and think it might have been better to wait for slightly higher, but its in now so will see how it goes. In a way, yesterday’s dip in the Dow at the close and the FTSE not following means it might do today. Also, everything seems to be getting more and more bullish – always a warning sign.
For the bulls, the key level to hold will be that 6810 area that formed good support yesterday, and is the bottom of the 30 minute channel. If that holds then I think we will see the 6848, if not then we might just start to see the tide turn towards the bears.