Dip and rise? Bears in control though.

Good morning, hope you had a good weekend. Bulls fought a bit harder than expected last thing Friday (and stopped out my risky short, which seems it was just a bit early)  but since the close the bears have come back and the overnight action is distinctly bearish, with the S&P dropping back to 1679 and the FTSE at 6430 as I write this. This is due to the Chinese GDP downgrade by the World Bank, to 7.5% from 8.3%. The focus will really move onto the debt ceiling in the US now and the failure to sort out the current standoff is likely to weigh heavily on indices. Today main UK news will be the Royal Mail flotation which looks like it will go well judging by demand for the shares at listing, today and tomorrow are the last days to apply.  Will it do a Facebook though?

Asia Overnight from Bloomberg

Asian stocks fell, with the regional benchmark index extending last week’s drop, as U.S. lawmakers wrangle over the debt limit and partial government shutdown.

The MSCI Asia Pacific Index fell 0.9 percent to 137.91 as of 1:53 p.m. in Tokyo, with all but one of its 10 industry groups dropping. The gauge lost 1.2 percent last week, the first weekly drop in more than a month, as the partial U.S. government shutdown stoked concern lawmakers won’t be able to agree on raising the nation’s $16.7 trillion borrowing limit later this month.

“The U.S. situation is clearly abnormal and the uncertainty doesn’t make things easier for investors in risk assets,” said Masaru Hamasaki, a senior strategist at Tokyo-based Sumitomo Mitsui Asset Management Co., which oversees about 11.2 trillion yen ($115 billion) in assets. “If the U.S. defaults and misses paying its bills even just for a few days, the market will turn chaotic.”

U.S. Speaker John Boehner said yesterday the House can’t pass an increase to the debt ceiling without packaging it with other provisions — a nonstarter for President Barack Obama.

US Futures

Futures on the Standard & Poor’s 500 Index slumped 0.6 percent today. The gauge dropped for a second week last week as the first partial government shutdown in 17 years began.

Default Risk

Treasury Secretary Jacob J. Lew said Congress needs to pass a debt-ceiling increase by Oct. 17 or the U.S. will be “dangerously low” on cash and risk defaulting on its payments. Federal Reserve Bank of San Francisco President John Williams estimated a two-week government halt would shave 0.25 percentage point off fourth-quarter economic growth.

The shutdown delayed the release of the Labor Department’s monthly payrolls report, which was due Oct. 4.

“Markets need to be aware that the impasse on Capitol Hill is far from being resolved,” Evan Lucas, Melbourne-based market strategist at IG Ltd. said in a note today. “The shutdown stalemate continues to ebb and flow and is disruptive.”

FTSE Outlook

ftse 100 prediction
ftse 100 prediction

There is no denying that the debt ceiling issue is going to weigh heavily on markets up to the 17th October, and the bottom line is that a default will be very bad news, with global repercussions. Therefore I would like to assume that for all the posturing and bluster and back room deals, an 11th hour deal will be done as is usually the case in these situations. In an ideal world of course, they might actually look to pay down the debt rather than add to it but hey ho, max that credit card! The Bianca channels have support at 6390 on the 20 day and I feel that this is a fairly key area. If this breaks then we will get that 6200 I mentioned a while back, possibly even 6100 or lower. The daily trends are also firmly down at the moment, and the bulls will need to break 6635 to break that trend (top of the Bianca 50 day channel).  If bulls can get prices above 6456 today (top of the 10 day) then 6475 is likely, however it looks weak at the moment pre market with the China downgrade. Both the 10 day and 50 day Bianca channels are around the 6360 area so if that’s seen today then its likely to offer fairly good support as the swing traders come in. to start with it all looks weak though, much like the Dax, with bearish EMAs and coral on the 30 minute. Initial trend is therefore down, however, Monday morning opens can be choppy and there is a possibility of a gap close (where the price tries to get to Fridays closing level).

61 Comments

  4. Looking to get long around 6380 bottom of the consolidation.
    With all this bad news around would not be surprised the DOW hit 16,000

  5. Got the short from fridays high, long at 6400, just sitting on it to tuesday morning, rise and dip.

    1. I closed longs Friday @ 6475, looking to get long again around 6380.
      Hoping SPX500 hits 1670 first…

  6. a lot of buying going on according to IG insight, 69% clients long, so means price bound to crash…!?!

  7. Hello

    I’m new to this, can anyone explain to me why the ftse chart on google finance is not updating automatically? It used to update in real time but now i have to refresh the page if I want an update. It’s still working for other shares but not the ftse. Can anyone help?

    thanks

  8. I am waiting for ftse to hit 6380 then place a small long if it will go lower i will add to my long a little bit at every key levels

  9. Me too, will build long positions using small stakes, hopefully down to 6350 area, hoping for a move back up to 6700 over the next few weeks.

  10. will Ft down to 6380???
    Ft has try thrid time 6389 but still cannot drop to 6989.
    Ft will be up .
    Any comment???
    Quick

  11. Ftse wont drop now that is for sure terry, im bullish for the short term, definitely will see the drop towards the end of the week.

    Too bad for those who were expecting 6520, just going to be a slow but choppy descent until early november then the rallies 🙂

  12. If it won’t hit 6380 today I don’t mind I will get it this week. I don’t trade to having a trade running all the time. All I try to get is one good trade a week….

  14. Terry , go home ….. You seem to want someone to take your hand and tell you which way the markets are going to go .idiot

  16. Pure guess Terry but I think FTSE will touch 6350-60 by US close at 9pm…just to stop hunt the longs…just to make them really squeek before a dcb rally…

  19. Senu hope you have tight stops as it looks to ve bullish until market close, dobr think we will break 6380 until tomorrow afternoon

    1. Yes Ahwab, I am into wrong trade.. been tempted to get loss.. but still holding and try to get out near entry

  21. Oh well looks like 6350-60 is unlikely today with the rebound to 6440…I would have thought that we would have got a quick sharp spike down to 6360 area to take out stops….usually happens….

  22. got a 2 lot short at 6430, lets see how it plays. Thinking US will drag down FTSE outside europe market hours.

      1. Yes, my initial target was for 6496 (overnight) but that wasnt achieved,
        What ive done now is a bit of a risky trade not going to lie (at least risky for me), but I do believe that the region around 6430-6450 is a key point and markets finding it hard to break
        My stop is very tight though (SL – 6442) and profit take at 6410.
        And i think the market will reach that once ftse closes (4.36) as I believe US will drag the markets down.

        1. if the market falls below 6420 (i will set SL to 6430, meaning i break even). Otherwise ill wait for 6410 :).
          I sense a bit of hostility, im here to learn as well mate, just thought it be a nice if i provided input -.-, I really dont want people to follow me though haha.

  23. Dont worry senu i think it will be sideways for the remainder of the day might see a high for 6451 with DOW trying to push 15000+ but i doubt it, just a slow choppy drift down

  28. Might see a rise towards the end and into tomorrow, typical sell the highs i think now we know we are in bear market, though a bit restrained.

  29. Ahwab, There’s a small chance we could be in a decline if you took the daily charts from May this year. I see a bull market that started in March 2009 and until we break 6000 I’ll still hold that opinion. If the USA get a positive outcome on their debt ceiling I see this breaking 6660 quite quickly

  30. Hi All, been away from the pc today so haven’t traded. There’s a number of companies going ex-dividend tomorrow, could anyone advise wether it’ll be a big adjustment this week, or not? thnx

  31. Yes but for the short term the weekly looks bearish. In the end there will be s rally towards the end of the year as always but i doubt the market will want to build a market on sand as this year already is a record breaking year in terms on new highs which i am sure we will revisit soon, but not before a short decline. Regardless i am a day trader and although i take long term into consideration, we have to be flexible on the day.

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