Good morning. We got the dip and rise yesterday which stalled as expected at around the 6555/6565 area. I wasn’t sure what it was going to do from that point so my arrows ended there for the prediction. It was a 50/50 chance of more rises to test the 6570 area, or tank. As we know it did the latter, and drop it did. Its being pinned on the tapering starting soon, based on that US debt deal I mentioned. Unfortunately prices never got as high as our ideal shorting area at 6565, but will probably drop a bit further before any possible rally nearer to Christmas. It felt like it was too early to start just yet. Looking at the S&P its right on the bottom of the 20 day Raff channel at 1778, so could possible form a bottom here. If not then I think its heading to 1757. It certainly closed weakly yesterday, dropping the most in a month yesterday. Be good to get some clarity for a little while longer after the Fed meeting next week (17/18 Dec).
Asia Overnight from Bloomberg
Asian stocks fell, with the regional index heading for its lowest close in two months, as investors speculate the U.S. budget deal will give the Federal Reserve confidence to curb stimulus as soon as next week.
The MSCI Asia Pacific Index slid 0.8 percent to 138.69 as of 2:02 p.m. in Hong Kong, falling for a second day as all 10 industry groups on the gauge dropped. The budget compromise forged by U.S. lawmakers, which will ease automatic spending cuts and reduce the deficit, comes after 34 percent of economists surveyed by Bloomberg on Dec. 6 said the Fed will begin paring its $85 billion in monthly bond purchases when it meets Dec. 17-18.
“There is risk of a short-term correction in shares,” Shane Oliver, who helps oversee $131 billion as head of investment strategy at AMP Capital Investors Ltd. in Sydney, said in an e-mail. The risk is “we see a combination of Fed tapering and a faster growth acceleration. After the rapid gains of the last two years, shares are no longer dirt cheap. As a result, returns are likely to be more constrained and volatile.”
Futures on the S&P 500 slid 0.1 percent today. The gauge yesterday posted its biggest back-to-back drop in two months as the congressional budget accord fueled speculation the Fed may trim stimulus next week.
FTSE Outlook
Oh dear. The bulls have really mucked up their chance, however they might just be keeping their powder dry as this drop looks fairly ordered to me. Overnight we have a low of 6467 so that’s the line in the sand for the moment. with the S&P sitting on its 20 day Raff then a bounce is possible, and it will be nice to get some clarity of Feb tapering plans. They will taper of course, its just a question of when and in the meantime we get these fear driven sell offs then the reassurance bounces. I still think they will wait till the recovery is really cemented in before tapering. At the end of the day if you have thrown a couple of trillion in, what a few more billion and tapering too early might scupper it. That said, if we continue being weak and start breaking below this current level, a drop to 6175 is possible, which is the 25 EMA on the monthly chart below. We are currently near the 10EMA at 6450.
