Good morning. The bulls managed to hold onto that support level at 6714 yesterday but despite best efforts were thwarted at the 6766 level. It was a bit of a tricky one to call early doors yesterday and it did look like the 6766 level would break, which is why I didn’t SMS the short there – felt a bit too risky. Overnight prices have hovered around 6750 so not too much downside yet, though most are waiting for Fridays payroll news before starting to load up long or short. I think today will probably see a break of the 6766 level, to reach 6783 (top of the 10 day Raff) and possibly 6807, as will probably be the case tomorrow as well. Friday will be more volatile and I think we will be back to good news is good and bad news is bad. Decent jobs news out of Germany yesterday (reduced unemployment) certainly fuelled the Dax bulls.
The top of the 10 day Raff on FTSE, Dax and S&P isn’t far away, being 6783, 9580 and 1843 respectively – thus possibly limiting the upside potentials for the moment.
Asia Overnight from Bloomberg
Asian stocks climbed for the first time this year as Japanese shares rallied on a weaker yen before the release of Federal Reserve minutes. Gold fell a second day while natural gas advanced.
The MSCI Asia Pacific Index rose 1 percent by 3:22 p.m. in Tokyo, after dropping to a 2 1/2-week low yesterday. Japan’s Topix (TPX) climbed 1.8 percent. Standard & Poor’s 500 Index futures and FTSE 100 Index contracts were little changed. The yen depreciated against all its 16 major peers, and South Korea’s won rose from an eight-week low. Gold and silver declined at least 0.5 percent, while natural gas added 0.8 percent.
Minutes of the Federal Reserve’s last meeting and a private report that may say U.S. companies added workers will be released today. Data may show German exports rose for a fourth month and factory orders increased, while unemployment in Italy climbed. The International Monetary Fund plans to raise its forecast for global growth.
“The situation in the U.S. will continue, it will pick up steam, so we might expect growth to surprise on the upside,” Bill Maldonado, the Asia-Pacific chief investment officer for HSBC Global Asset Management, said in a Bloomberg Television interview. “As long as Europe doesn’t drop back into recession, developed-market growth will be very good news, especially for North Asia because export demand is going to be crucial to those economies in 2014.”
Fed policy makers said last month they will taper monthly bond buying to $75 billion from $85 billion. They will probably reduce purchases in $10 billion increments over the next seven meetings before ending them in December, according to the median forecast in a Bloomberg News survey.
U.S. Jobs
The S&P 500 advanced 0.6 percent yesterday as the U.S. trade gap narrowed 12.9 percent in November to $34.3 billion, smaller than economists projected and the least since October 2009, Commerce Department figures showed.
The ADP National Employment report will probably show private payrolls in the U.S. rose by 200,000 workers last month, after gaining 215,000 in November, according to the median of 36 economists’ estimates compiled by Bloomberg. The Labor Department releases payrolls data on Jan. 10.
“The U.S. trade figures and the IMF’s plans to raise its global economic growth forecasts show that the world economy is on a recovery path,” Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities, a unit of Japan’s second-biggest lender, said by phone. “The outlook is for U.S. fourth-quarter earnings to be favorable, and the expectations are also strong for Japanese company earnings.”
FTSE Outlook
So onto the FTSE. I expect that we will break that 6766 level today, in fact while I have been writing this email we have climbed off 6750 to 6760. I expect that we may see a bit of a stumble at 6785ish though as we have the top of the 10 day Raff there, and with the S&P hitting the top of its 10day Raff also at what will probably be after a similar sort of rise, the bears might put in an appearance here. downside could be limited though as I think the market wants to price in decent jobs news and there is still a lot of “buy the dip” going on, as we saw yesterday.
If 6785 does hold as resistance then a dip to 6747 (daily pivot) and 6736 looks likely, before probably rising again. I do still think we will see higher prices yet and the Bianca chart is currently flagging 6827 and 6892 as potentials. The weekly chart still looks good for an ultimate 6950.
If the bears really get going today and break below 6736, then next support after that is yesterday’s low at 6715. A break of that changes things and could lead to a lot more downside. Initially today on the 30 minute chart the EMAs look good for an initial push higher.