Good morning, well I think we can safely say that 6400 held yesterday. Was a bit annoying that we didn’t get a test of it in hours after that move down overnight on the Chinese data. Was quite surprised it rallied so much yesterday pre Fed meeting, would appear that the market is fairly confident that tapering is off the table for the short term. Anyway, should it start to collapse again then 6422 and 6409 are possible supports. Initially today, if the bulls are to continue this run then we will need to break 6545 which is the top of the 10 day Bianca channel. I do still think that we will get the 6800 year end though.
Asia Overnight from Bloomberg
Asian stocks rose, with the regional benchmark index rebounding from a three-month low, as investors await the outcome of a Federal Reserve meeting after reports showed manufacturing growth accelerated in Europe and the U.S.
The MSCI Asia Pacific Index gained 0.5 percent to 137.72 as of 11:13 a.m. in Hong Kong, with nine of the 10 industry groups on the gauge rising. The measure fell the past two weeks as improving U.S. economic data spurred bets stimulus will be reduced. The Fed will start paring $85 billion of monthly bond purchases when it concludes a two-day policy meeting tomorrow, according to 34 percent of economists surveyed Dec. 6 by Bloomberg.
“With signs of recovery worldwide and stronger economic data, optimism has seemingly returned ahead of the key U.S. Federal Reserve decision due later this week,” Tracey Warren, a Sydney-based trader at CMC Markets Stockbroking Ltd., said in an e-mail. “With last month’s positive payroll data and the economy continuing to show signs of growth, some believe that imminent moment could come as soon as this week’s meeting.”
Euro-area manufacturing reached a 31-month high in December, led by Germany, a survey from London-based Markit Economics showed yesterday. U.S. industrial production climbed in November by the most in a year, a sign factories are bolstering the world’s biggest economy, a separate report showed yesterday.
Futures on the Standard & Poor’s 500 Index slipped 0.1 percent today. The gauge yesterday halted a four-day losing streak, rising 0.6 percent.
Fed policy makers have scrutinized data and watched Washington’s budget negotiations to determine whether economic growth is robust enough to withstand the withdrawal of some monetary support. The House of Representatives last week passed a budget that limits automatic spending cuts and avoids another government shutdown. The Senate is expected to vote this week.
The Fed has said it won’t cut stimulus until it sees signs of sustainable economic recovery. Unemployment has since fallen to a five-year low and third-quarter economic growth was stronger than forecast.
FTSE Outlook
As with the S&P I wouldn’t be surprised if we have a fairly flat day of consolidation today, with a pull back to one of the fib levels, most likely 6480 which is the 38.2% line. Today’s pivot is 6491 as well so support at approximately this area (6480/90) is likely. There is a distinct possibility that yesterday was just a bull trap so loading longs on the pullback zones today should have fairly tight stops just in case. Its worth noting that we are at the top of the Raff channels, and pretty much bang on the 10 day, so I think an initial drop is most likely. Should we hit the top of the 10 day Bianca and 20 day Raff at 6545 I think that would be a good place for a short.
The short trade I alerted yesterday obviously didn’t work as that was quite a charge yesterday though at least the stop was fairly tight so damage was minimal. Trending days such as that one don’t work well for support and resistance plays!
The fed will be coming even more into focus now as the meeting starts today till tomorrow, with the taper news likely due on Thursday.