Good morning. Well yesterday was a bit of a non-event from a bull point of view, taking all day (and night) to drop to the 6600’ish area. I got the short order taken at 6640 but that got stopped out, but further shorts paid off for the drop down. Was just a bit too early with the original top level and the speed of the drop to the 6600 area. Its now at the levels for the longs mentioned yesterday and I think that those 2 trades are still valid for today, provided prices hold above 6590. That’s the two longs from 6613 and 6603. As expected its certainly been a tricky week, with the market still seemingly digesting the non-tapering news and if this is a good or bad thing. Good in that there is more QE, bad as it means the economy isn’t great yet. I still think the UK QE will be increased to £400bn at some point in the near future.
Asia Overnight from Bloomberg
Asian stocks rose, with the regional benchmark index on course for its biggest three-week gain in two years, as a weaker yen boosted Japanese exporters.
The MSCI Asia Pacific Index rose 0.1 percent to 141.22 as of 1:24 p.m. in Tokyo, poised for a third straight week of gains and extending a four-month high. The measure climbed 2.9 percent this week through yesterday after the Federal Reserve unexpectedly refrained from reducing stimulus measures, saying it wants more evidence of an economic recovery before paring its $85 billion-a-month in bond purchases. A Bloomberg survey of economists had forecast a $5 billion reduction.
“The dollar will strengthen against the yen in the long run on the U.S. economic recovery, which is good for Japanese stocks,” said Juichi Wako, a Tokyo-based equity market strategist at Nomura Securities Co., the nation’s biggest brokerage. “It’s a matter of when the Federal Reserve will start tapering its stimulus.”
“Things are picking up and companies are more confident about the future” in Japan, Clay Carter, head of international equities at Perennial Value Management Ltd. in Sydney, told Bloomberg TV. “We’re overweight Japan and confident on Japan, but not wildly bullish. The confidence that companies have about the medium term is a positive for us. We want to see that in the earnings numbers and the macro-economic numbers that will be coming out in the next three months.”
Outlook
I am still feeling bullish for the moment as long as prices hold above 6590. With the Dax also near the bottom of the 30 minute channel that could bounce which would also buoy the FTSE up. I expect we will test the top of the Bianca 20 day channel again before too long. Having been driven up by the QE non-tapering news bull will be keen to regain the 6650 area and a break of 6654 should get to the 6680/90 mentioned yesterday (which is the top of the 20 day channel). We are likely to see some profit taking ahead of the weekend but maybe not that much, as its very much risk on for equities at the moment. the bottom of both Bianca channels are at 6561 for today so if it does all go bearish then there would also be support there.