Good morning. Well the long side was definitely the side to play for most of yesterday, with the FTSE just failing to reach the 6738 target before some profit taking kicked in with a dip to 6690. That is now a fairly key level and could act as fairly decent support for another push up towards 6738 (top of the 10 day Bianca) or more, possibly 6771 where we have the top of the Bianca 20 day channel and both Raff’s. Between them I also have 6756 as resistance. If we did get 6770ish then that would be a decent shorting area. We had 2 tests of the 6775 yesterday, the first one which I went long on for the run back to 6700, but it was the second one that really went for it. Unfortunately I didn’t go long a second time! Once again the rises are all based on the market believing that the Fed will be continuing QE, a believe that saw yet more records – 16000 Dow and 1800 S&P. Its worth noting that the bears didn’t short the hell out of those levels (the adage “Never fight the Fed” holding them back most likely), so even higher level might be on the horizon. 1810 is possible on the S&P, which would be around 16200 on the Dow at a rough approximation. Despite dipping to end negative I expect the S&P will regain that 1800 level. I also still think we will see a tapering plan mentioned at end of Q1 2014, starting April 2014.
Asia Overnight from Bloomberg
Asian stocks outside Japan rose, with a regional benchmark index heading for a four-day rally, as Hong Kong stocks extended yesterday’s gains amid optimism China’s economic reforms will boost growth.
The MSCI Asia Pacific excluding Japan Index added 0.1 percent to 478.23 as of 2:03 p.m. in Hong Kong. The MSCI Asia Pacific Index, which includes Japan, was little changed near the highest level since Oct. 30 after rising 3.2 percent over the past three trading days as China pledged to execute economic reforms and Federal Reserve chairman nominee Janet Yellen said she would continue U.S. stimulus.
“The market is still optimistic about the detailed reform plan announced” by China, said Teresa Chow, a fund manager at RBC Investment (Asia) Ltd., which oversees $1.5 billion. “Since Hong Kong and China markets are underweighted by many fund managers, some of them might want to increase their weighting.”
U.S. Futures
Futures on the Standard & Poor’s 500 Index gained 0.1 percent today. The measure dropped 0.4 percent from a record yesterday. U.S. stocks have risen for the past six weeks as Yellen signaled she will continue stimulus efforts. New York Federal Reserve Bank President William C. Dudley yesterday said he’s “getting more hopeful” the U.S. economy is gaining strength as the drag from fiscal policy wanes. The central bank’s monetary policy is likely to be accommodative for a long time, he said.
The Federal Open Market Committee won’t taper its purchases until its March 18-19 meeting, according to the median estimate of 32 economists surveyed by Bloomberg News Nov. 8.
“The direction is up for everybody,” said Mikio Kumada, a Hong Kong-based global strategist for LGT Capital Partners. “We are in a positive bull-market environment. The global economy is growing, Asia has been underperforming for many years and valuations are not expensive.”
FTSE Outlook
As with the Dax and also yesterday’s movement I think it makes sense to buy any dip to 6692 today for another bounce today. However, with the 20 day Bianca channel coming down to 6771, and in fact turning down as well, I think that the upside won’t keep going till Christmas just yet. I am thinking that we might get another dip and then a rally to kick in mid December. The Raff channels are a little bit more optimistic for today, with the tops for both the10 and 20 at 6773. Therefore, if that level is seen I am shorting there as 3 daily channels all flagging 6770 is worth sitting up for. We have a pretty decent 30 minute ProTrend channel in play, with support at 6685ish and resistance at 6750, so I expect that we will stay within that channel for today, barring any adverse news. The blue arrows are therefore my main focus, though if we exceed the top of that channel to 6770 then that’s a decent shorting area. If its all going pear shaped for the bulls today then if prices break below 6670 we could be looking at the bottom of the 10 day Bianca at 6617 or the bottom of the Raff’s at 6600.