Good morning, well the stalemate in the US continues which has put the brakes on Fridays rally – purely driven by hope that a deal was going to be done on Saturday. As you would expect on still no deal, futures prices gapped down on Sunday night with the FTSE dropping 60 from its 6530 high seen at close. It all doesn’t bode well for the second part of this financial time bomb, as the debt ceiling will be hit on the 17th October. China and a few other US debt owning nations are probably getting rather frustrated/worried! Talking of China, their latest news was that exports unexpectedly fell, while food prices rose, also fuelling the bearish scenario.
This from the Telegraph explains it pretty well – “There are two parts to the current episode. The first is the shutdown of large parts of the American government because of Congress’s failure to pass a Budget. The second is its refusal to raise the debt ceiling. Congress regularly reviews the ceiling and usually increases it without incident, thereby allowing the US Treasury to go on borrowing. But this is what the Republican majority in the House of Representatives has been refusing to do now as they are in a dispute with the Democrats (and President Obama) over a healthcare bill popularly known as Obamacare.”
The US situation will be the main focus this week I imagine and if a deal is done then we, based on Fridays movements, get a decent rally. However, the longer it drags on the more bearish it will be. To be honest it looks like markets are fairly certain a deal will be done, its just a question of when.
I mentioned 6509 as a decent shorting point on Friday, however, whilst stalling there initially, prices went a bit higher on the hope of a debt solution, but have since fallen back to 6470 at the time of writing. I did have a short there but got stopped out at 6520 (kept it tight as it was Friday, and didn’t fancy holding over the weekend in case a deal was done), however if still holding from there then it looks like it should do well early this week.
Asia Overnight from Bloomberg
Asian stocks and U.S. index futures fell, while the yen snapped a four-day slump as American lawmakers struggled to reach an accord on raising the nation’s debt limit and restoring government operations. Industrial metals dropped after Chinese exports unexpectedly decreased.
With the U.S.’s borrowing authority set to lapse Oct. 17, the Senate wrapped up almost four hours of debate in Washington without unveiling a deal. China’s exports unexpectedly fell in September and inflation jumped on food prices, signaling constraints on the nation’s recovery as Premier Li Keqiang seeks to sustain growth without adding monetary stimulus. India today may report benchmark wholesale-price inflation was at 6 percent in September, compared with 6.1 percent a month earlier.
“There was no miracle deal done over the weekend in Washington, and investors were hoping by Monday morning things would be clearer and we could think about something else for a change,” said Richard Sichel, the chief investment officer at Philadelphia Trust Co., where he helps oversee $1.9 billion. “Instead, the debt ceiling is there, and all those headlines get in the way of looking at fundamentals.”
FTSE Outlook
Its going to be all eyes on the US this week and any hope of a resolution should see a climb. However, for today the futures have found support around the daily pivot area at 6468 though 6489 could be a stumbling block on any rises, as well as that 6509 level which is still on the radar, and likely to be hit if 6489 breaks. Support is pretty close at 6434 though, being the 200ema and a break of that could see us testing the bottom of the Raff 10 day at 6315 fairly quickly. I am thinking the bulls will try and keep Friday’s bullish momentum going but probably won’t have much luck past 6509. Unless some deal is suddenly reached today and then it could break that resistance and head for 6600. We are still above the Bianca 10 and 20 day channels hence why I have a slightly bearish overtone.
Went short at 6498 stop at 6523 looking for a drop to 6470 area then a possible long from there (depending on if there are updates on the US situation).. what do you guys reckon??
Hi Deez, have you closed this short and gone long? Thanks
deez going short atm feels like picking up pennies in front of the bulldozer. while no deal is guaranteed I am told early am us time the senate is to floor a proposal which will get the ball rolling on a deal. I would wait. However, you have fairly tight stops so ..I guess we will see
lol..i definitely hear you on that one- but in these kinda circumstances i only trade £2 per pip anyway so i’ll wait and see the outcome.
appreciate your insight tho
It will be sideways movement until the debt ceiling is resolved this week.
Hi Ahwab, are you currently in the market? I’ve a small short running.
Ft still strong even Germany n Dow is drop.
Hope ft will drop
‘picking up pennies in front of a bulldozer’ hmmmmm i like that alot, consider that saying stolen by me.
No ftse dvidend payment this week
No senu still not convinced about the rise yet-but we’ll see though
Thanks, just to confirm because, holding some shorts from Friday.
lool now im convinced
The insanity doesn’t seem to be triggering a mood of despond … 🙂
Anyone holding shorts?
Thanks for posting the divi adjustment
C59
The trend is your friend people jumping into shorts prematurely,picked up 32 points since this morning with my only trade. Keeping trading to a minimum this week, until we get debt ceiling done with.
Personally believe that the debt crisis will averted one bullsht way or another, we will see an initial bullish spike up followed by some bearish the following week till early November, then Christmas rallies.
I believe the spike will be a possible short for me. Do you have a target Ahwab for the peak for the forthcoming spike? Do you think we’ll hit new highs or will that wait till early next year?
can’t believe you’re trying to predict the top of a spike…LOL !
…just wondering if you could see a key level coming up where the bots are likely to start selling. my gut says 6650-6680 but could spike through for all i know!
As I understand, al, you only enter into a trend and never short the tops?
Personally not sure but from experience in these negative situations they almost always are averted pushing the market up, then possibly 6650 as a target but more DOWs 15700, we might see a sell off.
As I really can’t see the next few months to the year end be a continual rise up, so expecting the dip before the rise. It’s all this political bs that really stir the market up, in the end if the big boys want it to go in a particular direction they will.
The market is getting no direction. Any one short ftse?
Al I did not say I could predict the top of spike I merely expressed my opinion that after an initial spike we might see a drop. C59 just asked me a rough estimate where I predicted a spike of 70-80 points, I did not state trade at those points for all I know it could just keep going up.
Ps no one can predict the market I’m sure you would know from last week’s rise.
P.s Tan if the market shows no direction just stay out till it trades as quite a few bad trades I know from experience is because of the impulse to trade something
There is something far worse than No Direction……it’s One Direction! Sorry guys couldn’t resist.
Back to the market it seems that things have calmed down and a deal is pretty imminent. I would go with it for now. As I said a couple of weeks ago it was time to dip your toes till the end of October. After that once the Govt has reopened and we finally have some data releases the talk of tampering will start again. Personally I thought Ben would like to get it going before he leaves but with the Shutdown he’s running out of time and I’m not convinced we will see tapering in November. So short upto the FOMC meeting and then long till year end.
Nice one javed, likewise next few weeks before the months end should see some bearishness. So when it drops going to jump on the bandwagon.
I see nothing for FTSE but just to get to that 6630.
If we do see any dips they will be next week through to the FOMC meeting in November. I expect the FTSE to dip to current levels 6550 which I think will be a good buying opportunity as they are now. Then to finish the year strongly. I did say 6750 but that is me being conservative having effectively bought at 6425.