Good morning. What a great trade that was yesterday – it was nice to be on a trending day that just ran and ran and have got on right at the start with the dip to that 6696 level. The good news is that the bulls are still going at the moment and it looks like we will see the 6800/6850 area. Maybe even 6950 soon for the weekly short signal. We have now formed a pretty solid base at the 6694 area, so any break of that in the near term will lead lower, probably 6600ish. JPMorgan’s results were out yesterday, today its Bank of America. JPM’s were mixed – flat revenue affected by fines, but EPS on target pretty much. That might set the tone for all the results.
With the world bank raising global growth forecasts and everyone still seemingly extolling the virtues of being long and that there is still loads left in equities, it might be time to start being just a little cautious. It always looks a bit suspect when everything you read is saying buy/go long – its almost as if they are just sucking the last sideline remaining people….. we are just nudging the top of the 10 day Bianca channel at 6787 as I write this, having dipped off the 6770 yesterday (but since climbed back).
Asia Overnight from Bloomberg
Asian stocks rose, rebounding from the benchmark index’s biggest drop since September, and the dollar appreciated on optimism the global economy is strengthening. Silver led declines by precious metals.
The World Bank raised its global growth forecasts as a recovery in advanced economies tempers the impact of tighter monetary conditions for developing markets. Federal Reserve officials Charles Evans and Dennis Lockhart will speak today in the U.S, where the central bank’s Beige Book business survey is due after yesterday’s retail-sales report beat estimates. China’s broadest measure of new credit fell in December while money-supply growth and new yuan loans trailed estimates.
“We expect stronger global GDP growth,” Stephen Corry, Hong Kong-based chief investment strategist at LGT Group, a private banking and asset-management firm that oversees about $115 billion, said by phone. “The outlook for equities is pretty rosy and profits still have the potential to go higher.”
World Economy
The Washington-based World Bank sees the world economy expanding 3.2 percent this year, compared with a June projection of 3 percent and up from 2.4 percent in 2013. The forecast for the richest nations was raised to 2.2 percent from 2 percent, while the expectation for developing markets was cut to 5.3 percent from 5.6 percent.
USA
Evans, president of the Chicago Fed, is scheduled to speak on the U.S. economy today, while Fed Bank of Atlanta President Lockhart — who said Jan. 13 that weak payrolls growth shouldn’t deter policy makers from further stimulus cuts — addresses the CFA Society in Atlanta. The U.S. Empire State Manufacturing survey is due along with mortgage data and the December producer-price index.
U.S. Stimulus
Fed policy makers said Dec. 18 they will cut monthly bond buying to $75 billion from $85 billion, citing improvements in the labor market. They will continue to trim it by $10 billion at each policy meeting before ending the program in December, according to a Bloomberg poll of 41 economists taken Jan. 10. The FOMC next gathers on Jan. 28-29.
“Even though the Fed will probably continue tapering, it will be largely offset by the fairly robust U.S. economy,” Shane Oliver, the Sydney-based head of investment strategy at AMP Capital Investors Ltd., which oversees $131 billion, said by phone today. “That will see share markets bounce back again today. But the volatility we are going through will continue a little bit longer given that investor confidence is running at a quite high level.”
FTSE Outlook
The ball is in the bulls court for today and there are a quite a few significant resistance levels coming up. all this bullish sentiment is a little worrying however there might be a little bit of a rise left, though starting to be being cautious is probably a good idea. I wouldn’t be surprised to see a bit of a dip on open, maybe to the 6766 area which is the 23% fib area from yesterday low to high, possibly the 50% line at 6752. Yesterday was essentially a trending day so we may get a little bit of consolidation today, as well as the fact that we are nudging the top of the 10 day Bianca channel at 6787. The coral is also at 6770 though so we do have a couple of support there.
If prices can hold above 6772 then the bulls case is stronger and we should see 6800. Assuming that breaks the next significant levels are 6830 and 6860.
Bears will be aiming to break below 6739 which would lead to 6694 (yesterday low) and if it really started to motor down then 6613 isn’t out of the question.
For today, I think a short from this opening level around 6784 is probably worth a go, targeting that 6750 area and possibly lower. I don’t think it will give up yesterday’s gains just like that, though we are nearing some bigger picture resistance at 6800.