Good morning, hope you had a good weekend. 6754 held as the resistance on Friday with a short that stopped just “short” of the 6710 area, and since that drop prices have recovered again. 6761 was Fridays high so that’s the lien in the sand for today, and a rise above that should see 6790 which was the same level we identified on Friday. That 10 day Bianca channel is still containing the price movements, with today’s extremes 6726 and 6817. A test of the top of that channel (coinciding with the recent high) would be good, as the bears keep getting beaten up at the moment every time they try and get the drop moving!
Asia Overnight from Bloomberg
Asian stocks fell after Federal Reserve Bank of Dallas President Richard Fisher said the U.S. central bank should end its record stimulus as soon as possible.
The MSCI Asia Pacific excluding Japan Index fell 0.2 percent to 478.38 as of 1:42 p.m. in Hong Kong, after rising as much as 0.2 percent. More than three stocks fell for every two that gained on index. Japanese markets are closed today.
“It’s all about the Fisher speech,” Chris Weston, chief market strategist at brokerage IG Ltd. in Melbourne, said by phone. “We’re starting to see a slight change in rhetoric from the Fed, more and more people are highlighting the cost of quantitative easing. The Fed rhetoric in the last few weeks has certainly been more hawkish than the markets were expecting.”
Fisher, speaking in Sydney, said: “At the earliest possible moment we need to focus on transitioning back to having an interest-rate-driven monetary policy.”
Last week’s advance on the MSCI Asia Pacific excluding Japan Index pushed valuations on the measure to 13.2 times estimated earnings, up from a multiple of 12.2 at the end of August, according to data compiled by Bloomberg.
China Manufacturing
Australia’s S&P/ASX 200 Index (AS51) slipped 0.4 percent. Singapore’s Straits Times Index gained 0.2 percent and Taiwan’s Taiex Index retreated 0.4 percent. Hong Kong’s Hang Seng Index (HSI) slipped 0.1 percent after rising as much as 0.4 percent and China’s Shanghai Composite Index added 0.1 percent.
China’s Communist Party leaders will enter a policy-making summit this week, with services and manufacturing surveys showing the economy is strengthening.
A non-manufacturing Purchasing Managers’ Index rose to the highest level this year in October, a government report showed yesterday. The increase follows faster-than-estimated growth in two manufacturing indexes last week.
U.S. Futures
Futures on the Standard & Poor’s 500 Index gained 0.2 percent today. The equities benchmark rose 0.1 percent last week after completing its second straight monthly gain, adding 4.5 percent in October. Of the index members that have reported earnings this season, 75 percent have posted higher profit than analysts estimated, data compiled by Bloomberg show.
FTSE Outlook
We are not far off the bottom of the 20 day Raff channel which matches the daily pivot at 6736 so I expect if we have an initial dip, there should be support around that area. Friday regained some strength with the climb off the 6715 area, effectively double bottoming. I wouldn’t be at all surprised if we see 6800 again, however, I don’t want to get too attached to upside as I think once the tapering talk starts up again then we will quickly reverse. I am still thinking we have a little dip to something like 6500 before the Santa rally kicks in this year and we close around the 6800 area.
I have a hunch that we might reverse this week and start a drop, but probably after retesting 6800. 6761 is likely to act as initial resistance I feel, with a dip to the 6736 area and assuming that holds, a rise to 6790 is likely.