Good morning, well as expected yesterday was rather choppy with a deal finally being done. About time! The long at 6517 was just a tad too early as it dropped to 6505 but then bounced. I had the stop a little too tight at 6510, but I k now some of you held on and got the rise to the resistance level mentioned at 6583. I am still expecting the FTSE to hit 6600 soon, and equally the Dax still looks like it wants 8900. That said the FTSE is nudging the top of the 20 day Bianca channel at 6569 quite firmly so we may see a break above then a dip back next week. Most will just be relieved for the moment that the US isn’t going to default and the government can reopen after Congress votes through the debt limit compromise. Till next year when we do it all again! Still, on the flip side it probably means there won’t be any tapering till next year, as expected all along anyway.
Asia Overnight from Bloomberg
Asian stocks rose, sending the regional benchmark index toward a five-month high, after the U.S. Congress voted to end the government shutdown and raise the debt ceiling.
The MSCI Asia Pacific Index gained 0.8 percent to 142.15 as of 1:20 p.m. in Tokyo, with more than three shares rising for each that fell. The U.S. ended the nation’s fiscal impasse as the Senate and the House of Representatives voted to halt the government shutdown and raise the U.S. debt limit as the deadline loomed today. President Barack Obama said he will immediately sign the agreement.
“Even though it doesn’t change anything, at least for the moment there’s a relief that there will be no U.S. default, at least before the new year,” Toby Lawson, head of futures, options and cash equities for the Asia-Pacific at Newedge Group SA in Sydney, said by telephone. “Investors can now focus on economic fundamentals. Europe is showing reasonable signs that the worst is over and the bearish view on China isn’t playing out.”
China Data
China is scheduled to release a slew of data tomorrow. The world’s second-largest economy may have grown last quarter at the fastest pace this year, according to a Bloomberg survey of economists.
The Shanghai Composite Index climbed 0.5 percent, heading for its first advance in three days. China’s economy probably expanded 7.8 percent in the third quarter year-on-year, after expanding 7.5 percent in the previous three months, according to the median of about 50 estimates in a Bloomberg survey before tomorrow’s data. The nation will also release factory output and retail sales figures for September.
S&P Futures
S&P 500 futures were little changed today. The equity gauge jumped 1.4 percent toward a record yesterday as the Senate crafted a deal to end the government shutdown and raise the debt ceiling.
The House of Representatives voted 285-144 to clear a measure that now heads to Obama for his signature. The House vote came less than three hours after the Senate passed the bill, 81-18.
Failed Goals
The deal concludes a fiscal standoff that began with Republicans demanding the defunding of Obama’s 2010 health-care law and objecting to raising the debt limit and funding the government without attaching policy conditions. They achieved almost none of those goals in the agreement.
FTSE Outlook
As I write we are bang on the daily pivot at 6552 so I expect that to act as support initially. There will probably be a bit of a relief rally at the debt deal being done as money that was waiting on the side-lines comes in. Therefore today will probably be a decent buy the dip day. The daily chart is just starting to get an EMA cross for more bull, though its not locked in yet and the 10 and 25EMA are still pretty close (6503 versus 5497). Looking at the 30min the EMAs are just crossing for some downside so it will be telling to see if the daily pivot at 6552 holds. Bearing in mind the Dax plan above and the dip to 8810 then bounce, the FTSE could do the same. There is better support at the 6518 level if the pivot does break, and if the bulls can hold that then we could be on for a push to the 6600 mentioned earlier this week. I have plotted a dip and rise scenario (should have gone for that yesterday too as it did the complete opposite of my arrows!) mainly based on the 30 min EMAs looking a little bearish to start with and the fact that whilst the daily pivot has held as support so far, the bulls haven’t really pulled away from that level. Overall though I do expect today to be positive and the 30minute coral is still green (positive) for a short term bull trend.