Good morning, bulls were fuelled yesterday with the hope of Obama announcing some sort of deal in the afternoon, only for the meeting with Congressional leaders to be delayed, to give Senate more time to thrash out agreement. With the US markets closed yesterday for Columbus day, the futures prices still rose pretty well. Didn’t help my trade levels though as despite the longs from 6480 working fine, the short at 6509 got stopped out! Of course the markets are hoping for a deal and are pricing in a last minute deal as per usual hence we haven’t seen anything majorly bearish yet. As expected though, its all eyes this week on the US and the debt situation as the 17th draws closer, certainly not a week for the faint hearted to be trading!
Asia Overnight from Bloomberg
Asian stocks rose, with the regional index heading for a five-month high, as Senate leaders said they’re optimistic they will forge a deal to reopen the U.S. government and avoid a breach of the debt limit this week.
The MSCI Asia Pacific Index gained 0.4 percent to 141.45 as of 1:16 p.m. in Tokyo, with about five shares rising for every three that fell. Senate Majority Leader Harry Reid said “tremendous progress” had been made, though “we are not there yet.” Leaders are working on an deal to suspend the debt ceiling through Feb. 7 and fund the government through Jan. 15, a person familiar with the talks said, speaking on the condition of anonymity.
“It looks like the door is now open for compromise,” Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages about $130 billion, told Bloomberg TV. “The deadline is nearing and we’ll get through that. The volatility caused by this debt-ceiling debate will be with us until next year.”
US Futures
S&P 500 Index (SPX) futures added 0.1 percent today. The gauge rose 0.4 percent yesterday amid signs lawmakers may reach a deal before the government loses its ability to borrow money.
President Barack Obama postponed a meeting with congressional leaders to give lawmakers more time to reach an agreement. Senate Minority Leader, Republican Mitch McConnell, said he shares Reid’s optimism after talks in Washington.
Senate Delays
The possible deal could face procedural delays in the Senate and an uncertain path in the Republican-controlled House of Representatives, where Speaker John Boehner would have to decide whether to allow a vote or make changes. Should Congress fail to act, the U.S. government would run out of borrowing authority in two days and start missing debt payments sometime between Oct. 22 and Oct. 31, according to the Congressional Budget Office.
“It’s positive to see that they’re negotiating and trying to come out with some form of a deal,” said Timothy Radford, a Sydney-based strategist at brokerage Rivkin Securities. “We should probably get some deal by Thursday. That should provide some buying support for the market.”
FTSE Outlook
I have put a somewhat bullish scenario above for the Dax (members only), however, the FTSE is testing the top of the 20 day Raff at the moment, and having hit the bottom as recently as the 8th October at 6310 and fully crossed that Raff channel I am not sure that the FTSE will keep climbing. We are also above the Bianca channels though hovering around the top of the 10 day at 6541. Markets are pricing in a deal that’s favourable and will no doubt be relieved to actually get something sorted. Markets hate uncertainty as they say. Today’s pivot is 6493 so I expect any dip to find support there as the momentum is with the bulls at the moment. if that pivot level does break then that will certainly temper this current rise. Whilst the momentum is with the bulls I expect we will get the 6600 level soon, especially if a favourable deal is announced soon.