Good morning. Yesterday’s long trade wasn’t quite as fruitful getting stopped out, however the FTSE (and Dax, S&P) is on a decent support area at 6670 as I write this so there is still a chance that the bulls can have another go at making some highs. Ended up being a fairly tight range yesterday with no really decent signals. Ironically (as is often the way with trading), once the long got stopped the price rose back up to 6700. So, whilst there is a chance that the bulls could take prices back to 6738, the daily chart looks a little weaker with an EMA cross brewing, and as most are still expecting a dip before the Santa Rally kicks in then it likely we will see 6600 before too long.
Asia Overnight from Bloomberg
Asian stocks fell for a second day after valuations on the regional benchmark index reached the highest level since May and as Samsung Electronics Co. fell and Worley Parsons Ltd. (WOR) cut its profit forecast.
The MSCI Asia Pacific Index fell 0.4 percent to 142.20 as of 2:12 p.m. in Hong Kong, with five stocks declining for each three rose. The gauge added 0.9 percent this week through yesterday. The Federal Open Market Committee publishes minutes of its October meeting today after Federal Reserve Chairman Ben S. Bernanke said the U.S. benchmark interest rate will remain near zero for a “considerable time” when central bank’s debt purchases end.
“There is evidence of profit taking,” Ric Spooner, Sydney-based chief market analyst at stockbroker CMC Markets, said in an e-mail. “Upcoming data beginning with tonight’s release of U.S. retail sales has more capacity to shift thinking on the timing and pace of the Fed’s taper program.”
Markets advanced this week after China pledged to execute economic reforms and Bernanke’s nominated successor, Fed Vice-Chairman Janet Yellen, said she would continue U.S. stimulus. Retail sales in the U.S. probably returned to growth last month, according to a Bloomberg survey of economists before data due today.
OECD
The Organization for Economic Cooperation and Development cut its global growth forecasts yesterday, citing a slowdown in developing nations. The world economy will probably expand 2.7 percent this year and 3.6 percent in 2014, instead of the 3.1 percent and 4 percent predicted in May, the Paris-based OECD said in a semi-annual report yesterday.
S&P – Bernanke
Futures on the Standard & Poor’s 500 Index lost 0.1 percent today. The gauge dropped 0.2 percent yesterday, a second day of declines, as investors weighed rising valuations and disappointing earnings forecasts
“The target for the federal funds rate is likely to remain near zero for a considerable time after the asset purchases end, perhaps well after” the jobless rate falls below the Fed’s 6.5 percent threshold, Bernanke said in a speech to economists in Washington. A “preponderance of data” would be needed to begin removing accommodation, he said.
“He’s just confirmed that the quantitative easing measures will continue, certainly for the near-term future,” Kirk Hartman, Los Angeles-based chief investment officer at Wells Capital Management, where he helps oversee about $331 billion, told Bloomberg TV. “We all know that the end of the Fed tapering is coming, the question is when. The market is hopeful.”
FTSE Outlook
I think the FTSE will follow the S&P fairly well today, which is predicted to dip to 1780ish before a decent climb back to possibly as high at 1820! Whilst talking about the S&P, if 1780 did break then 1769 is the next support. (Breaking 1792 will lead to 1797 and 1805, possibly higher). Anyway, back to the FTSE. Today’s pivot is 6699 and if the 6670 area holds then that is likely to be a decent initial target for the bulls. They will however be keen to push higher than that and if the US plays the game that could easily be the case. I think that this dip we are currently seeing is a bit of a bear trap and there is still a case for a bit higher. At the end of the day none of the fundamentals have really changed, QE is ongoing, tapering is still a long way off, etc etc. That said, the daily channels are heading down but we have both Bianca channel bottoms at around the 6630 area for today. That MAY correspond to an S&P low around 1775, possibly. Of course that depends on the 6670 area breaking on the FTSE. Personally I am thinking it might hold, at least this morning before the US comes online. I am still seeing a bullish rise on the S&P from around this current level.