Dip and rise today?

Good morning. That was an interesting day yesterday  and as the bulls managed to break that 6400 area they certainly kept going. Someone bashed heads together in the US as it seems there was a bit of forward movement on the negotiations, even though there isn’t actually any sort of deal. Common sense would tell you that they won’t just launch over the cliff as they will be the laughing stock of the world (and also probably to then blame for the subsequent financial mess that would stem from doing so) so I still expect some last minute deal. It’s always tricky trying to trade on just sentiment/news driven days – almost more of a gamble than normal – hence why I have taken a little bit of a back seat the past couple of days. You just need someone to say something or rumour of a deal and it jumps, denial and it falls. Much better when its sticking to nice technical levels. Anyway, it seems as though the 6310 area marks the short term bottom but we have jumped quite far quite fast and are now testing the top of the various channels on both Bianca and Raff. Breakouts above or below the Bianca channels don’t usually last for too many sessions and it will be back within the channel early next week I imagine. Certainly yesterday’s rise on the back of some sort of debt deal, has brought the markets away from the cliff edge that they were peering over earlier this week.

Asia Overnight from Bloomberg

Asian stocks rose a fourth day and bond risk in the region fell as U.S. lawmakers continued talks on raising the nation’s debt limit to avoid a default. Zinc and gold climbed with emerging-market currencies.

The S&P 500 index jumped the most since Jan. 2 and Treasury bill rates dropped yesterday on optimism an agreement will be reached to raise the U.S. debt ceiling before an Oct. 17 deadline. Talks between Republican lawmakers and President Barack Obama will continue as they try to seek a “path forward,” according to Republican House Majority Leader Eric Cantor. The White House said “no specific determination was made” during an initial 90-minute meeting in Washington.

“Both sides are trying to step away from that cliff next week,” said Stephen Halmarick, the Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about A$170 billion ($161 billion). “People are assuming there will be some resolution before the 17th, but there’s clearly a long way to go.”

A U.S. Treasury Department report Oct. 3 said consequences would be “catastrophic” should the U.S. default. Treasury Secretary Jacob J. Lew said yesterday that “uncertainty” over the debt limit is starting to stress financial markets.

US Situation Latest from the Telegraph

“What we want to do is to offer the President today the ability to move a temporary increase in the debt ceiling,” Republican House leader John Boehner said on Thursday. The deal would involve a temporary extension of the debt limit to November 22 but no backdown on unlocking the budget standoff that has closed large parts of the government.

The White House said on Thursday night that Barack Obama had a “good” meeting with Republicans but that no way forward has yet been found.

Breaching its borrowing limit would put the US at serious risk of defaulting and likely plunge the world back into recession.

The Republicans have said the White House must delay Mr Obama’s flagship healthcare scheme by a year before they will agree to permanently raise the debt ceiling, or a new stop-gap budget.

FTSE Outlook

FTSE 100 prediction
FTSE 100 prediction

We climbed yesterday on the hope of a deal. If and when a deal is announced then we should go higher and the immediate threat of declines has receded. For a while anyway. The markets are certainly pricing in a deal at the moment, and will probably remain bullish today as well. Today’s big even in the UK will of course be the Royal Mail float – be interesting to see how it fairs over the next few weeks, as I seem to remember it was only a couple of years ago that RM was struggling – seems to have been turned round remarkably quickly! Looking to the S&P, its currently stalled on its upward path at around 1692 so needs to break this area (possibly 1695 where I have a rising ProTrend channel line) to climb to 1709 where there is a weekly ProTrend resistance line, with 1724 after that. Momentum is bullish though, but heading into the weekend we might see some profit being taken off the table later.

On the FTSE, today’s pivot is 6404 (and also the 200ema) so if that’s seen I expect support there. Based on the fact that we are testing the top of the channels I think we will see a dip, though probably short lived. Its Friday, with the ruling influence coming from the US, so it could really do anything! Assuming 6404 holds then we should be on for a decent pushy higher, assuming the US gets something sorted. If the price breaks below 6395 then we will be back at 6350 pretty quickly, and probably testing the bottom of the daily channels again around 6300.

56 Comments

  1. It looks like Nick’s dip-pivot didn’t happen today. Maybe yankee will drag it to pivot around 2-3 in the afternoon? Doesn’t seem like this at the moment.
    I missed morning long because of the school errands. Today is a special day.

  2. Why’s it special Jack?

    Anyway on a political note….it seems that the Republicans are really losing popularity on this issue and seen as putting party politics ahead of the country’s best interests. I don’t think even the Tea party, which makes our UKIP look relatively sane compared to the fruitcakes and racists in its ranks (funded by one of my former employers btw and of course inspired by uber fool CNBC’S Rick Santelli), would want to see the US default. If that happens then all bets are off and yes we will dip 10% easily in a week and keep falling. So it is a case of wrangling spending cuts and trying to twist the President’s hands. Very foolish and childish indeed.

    Btw – surely this has to affect the US’s credit rating like political wrangling did before. Will we see a downgrade early next year? I think it is a distinct possibility but an improving economy and a little bit of arm twisting may sway the rating agencies.

      1. Happy Birthday to your son.

        Yes good to remember why we do this and smell the roses from time to time. Enjoy the day with your son.

  3. btw
    ………a positive stock market performance in September has usually been a favorable signal for the final quarter of the year. In the 66 years since 1945, the S&P 500 gained an average 3.7% during Q4 and rose in price 76% of the time. Following positive Septembers – which happened 29 times – the S&P 500 gained an average 4.7% and rose in price 80% of the time.

    That suggests FTSE to be around 6700 – 6750 at year end if replicated.

  5. I think will be worrying about now… Personally traded twice throughout the week. Hopefully next week we seen some decline with yesterdays appointment hurrah subsiding over the weekend

  6. I think it likely that political events in the USA will continue to dictate the mood of the markets in the last quarter of the year. Resolution of the debt ceiling debacle is not a done deal, although the growing unpopularity of the Republican stance, at least that of the more extreme factions of the party, makes it more likely that disaster will be averted. There is scope for further volatility on this count. The debt crisis has dominated the headlines of late, but the issue of QE tapering lurks as a major catalyst, notwithstanding the safe pair of hands represented by Janet Yellen. The outlook seems to demand flexibility and fleetness of foot!

    Perhaps the most pressing immediate question is whether the FTSE will hold on to most of the gains made since the early hours of October 10, or retrace symmetrically. Acceleration has certainly weakened, but the 30 mins series for example is still quite bullish atm.

    1. Spot on Jim. The current deal only kicks the can down the road to year end at best and then we are in the same boat as last year – resolution of which did lead to a 5 month rally btw. However don’t necessarily think that is the case. Moody’s may not downgrade the US but a rating agency with some gumption might!

      Anyway either need to be flexible and fleet of foot – which is extremely difficult in such volatile times, or take a slightly longer view and have the resources to ride out the storm.

      Either way good luck!

  7. No senu, im out till monday. Its one of situations where if you place a position now itll go the ither way, i missed the long yesterday and its too risky atm.

  8. Likewise Jim i feel that they wont let the markets dip with newly appointed yellen it wouldnt look good.
    Cheers senu have a good one.

    1. Javed, apologies for not replying yesterday….i closed my short after hours @ 6421 so managed to take a lucky profit

    1. thanks Ahwab, your advice is always welcome. I’ve only a small short open with further to add at 6500. i might close soon

    1. He he … It’s an evolutionary fact that Americans are custom-built to kick cans down the road! Sorry, couldn’t resist it.

  19. Thanks Senu……you too………nice to have a 2 day break from trading.

    Senu – if you are serious about trading…..maybe look up Amplify trading…..they run courses.

  20. Looks like the Dax has really struggled today… If it’s was not for the ongoing talks in America I would be adding to my shorts. Will wait now and see what Monday brings.

  24. Well thurs fridays move took me by surprise i thought the previous weekly high would repulse lower…wrong!! Ended week with a very bullish weekly reversal candle, hence i entered long at 6520 stop 6375 target initially 6650 then reeval

  25. More US fallout tonight, Obama and Republicans seem further apart then ever, if nothing resolved or even positive vibes I expect Dow to tumble and drag everything else with it

  30. It is inevitable we get some pullback as things will go to the wire and especially as we have gone up 3% in a couple of days.The volatility will remain this week. Opportunities and risks will be plenty.

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