Good morning, we had a nice little dip down to the 6480 area yesterday and subsequent bounce, however the bulls didn’t really push on, no doubt waiting for the outcome of the Fed meeting taking place yesterday and today. As expected it was pretty much a day of consolidation. On the daily chart prices are still nudging the top of the 10 day Raff and 20 day Bianca, after Mondays sharp rise. For today its really going to be all eyes on the fed later on today (7pm) with the results of their meeting, tapering plans, rate decision etc. Ben Bernanke will be holding his press conference at 7:30pm, once of his last as Fed chairman before Yellen takes over next year. If its all fairly positive for markets then we will probably break through the top of these daily channels, dip back to retest them then continue rising. The flip side of that is that any weakness could well lead to 6408 and possibly lower, which would serious impact on the ability to get 6800 by year end. If the markets like what Ben has to say then movement above 6532 will be key – the high from Monday. Personally I am still quite optimistic and still think we will end the year quite strongly with no tapering till Q2 next year.
Asia Overnight from Bloomberg
Asian stocks rose for a second day, led by a surge in Japanese equities, as the declining yen boosted exporters and investors await a Federal Reserve decision on its stimulus program.
The MSCI Asia Pacific Index added 0.7 percent to 138.50 as of 2:06 p.m. in Hong Kong. The measure fell the past two weeks as improving U.S. economic data spurred bets stimulus will be pared. There’s about a 60 percent chance Fed Chairman Ben S. Bernanke and his colleagues will announce a cut in their bond buying today, according to Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., which oversees $1.97 trillion as the world’s largest manager of bond funds.
“If they don’t taper in this meeting they will give a strong indication of a taper in the January or March meeting,” Chris Weston, Melbourne-based chief market strategist at IG Ltd., said in an e-mail. “A failure to move shouldn’t cause too much of a reaction in the markets, as long as the chairman gives a strong indication it is coming. Much will be made of the tone of Ben Bernanke and how upbeat he sounds on the future of the economy.”
Futures on the S&P 500 Index gained 0.2 percent today after the equity gauge fell 0.3 percent yesterday.
Fed policy makers have scrutinized data and U.S. budget negotiations to determine whether economic growth is robust enough to withstand withdrawal of monetary support. The House last week passed a budget that limits automatic spending cuts and avoids another government shutdown.
FTSE Outlook
Today’s pivot is 6496 but a lot of movement today is going to be driven by anticipation of what the Fed might say, coupled with what they actually say later. Based on Mondays move and the consolidation yesterday the market is probably pricing in no immediate tapering, and will be looking to the tone of Ben’s speech to make a move. As with the Dax, the EMAs look favourable for an initial climb, but we have Mondays high at 6532 and also a ProTrend resistance line at 6525 which might put the brakes on that initially. Most will be wary about taking large position ahead of the Fed today. Not that I put too much weight on it but the IG Insight tool has 77% of clients long – the cynic in me therefore says that there will be a dip to stop some of them out before any rises.
For today I think this climb overnight will continue to the top of that channel then a dip to the pivot and I am going to go for a positive reaction to the Fed today, with a climb to 6575.