Good morning. Slightly frustrating yesterdays as the drop started from 6660, and I had my short order at 6670. Such is the game sometimes. The FTSE bears came out in force from that level though and despite the support levels holding for a while, once the US started to dip later in the day the FTSE didn’t stand a chance. Slow to rise, quick to drop and slightly out of step with its US masters. Eurozone news started off not being great yesterdays with Spanish PMI coming in below forecasts, but then improved with each bit of news after that. Not that it had that much effect, even hitting the bottom of the 10 day Raff at 6591 didn’t generate much of a bounce, so its fairly safe to say that the bears are holding the cards at the moment. However, everyone’s still standing by for the “Santa rally” if it comes this year. I think it will, but late – probably something like the 23rd December.
According to the Bianca chart this 6580 level looks rather significant – all 3 channels are showing that as a support area. If this level holds and we get a bit of a recovery today then 6635 and 6657 look possible. Maybe even the top of the 20 day Bianca channel at 6684, though that might be a big ask!
Asia Overnight from Bloomberg
Asian stocks outside Japan fell, with the equity gauge heading for its first drop in eight days, as signs the U.S. economy is strengthening fueled speculation that the Federal Reserve will soon start tapering stimulus.
The MSCI Asia Pacific excluding Japan Index dropped 0.6 percent to 471.58 as of 3:04 p.m. in Tokyo, with nine of the 10 industry groups on the gauge falling. More than $8 trillion has been added to the value of global equities this year, the biggest increase since 2009, as central banks took steps to shore up economies worldwide. U.S. stocks declined yesterday as investors speculated on the impact retail and manufacturing data will have on Federal Reserve bond buying.
“Economic data over the past few weeks have been progressively coming in better and markets are now in the mood to put good economic news as bad news because that will bring forward any reduction in central-bank support,” Matthew Sherwood, head of investment markets research at Perpetual Ltd., which manages about $25 billion, said by telephone. “There might be a little bit of downward pressure this month.”
S&P Futures
Futures (SPA) on the S&P 500 Index was little changed today. The U.S. equities benchmark index dropped 0.3 percent yesterday amid data that showed manufacturing unexpectedly climbed last month and retail spending fell on the weekend after Thanksgiving for the first time since 2009.
The U.S. Institute for Supply Management’s manufacturing index rose to 57.3 in November, a report yesterday showed, after economists surveyed by Bloomberg called for a drop to 55.1. Attention now turns to jobless claims and payrolls figures due later in the week, with four of five investors surveyed last month saying they expect Federal Reserve policy makers to put off cuts to their $85 billion-a-month in bond purchases until March 2014 or later.
FTSE Outlook
For today, after yesterday’s dip we may see a slow recovery bounce, especially if this 6580 area holds as support. If not then it would appear that a dip to 6540 is pretty likely. I am therefore looking to go with the slight risky, contrarian view initially and be long for today, unless 6580 breaks, which would require a change of stance. The FTSE is still very disconnected from the Dow which is usually follows pretty well. Whilst the Dow has risen from 15500 to 16100, the FTSE hasn’t really risen at all, bouncing around between 6600 and 6700.
Not much more to say about that really, fingers crossed 6580 holds as support for the moment and we get a decent bounce! If it breaks then just go short!