FTSE 100 Support 6665 6657 6641 6632 6609
FTSE 100 Resistance 6694 6719 6739 6742 6744 6783

Good morning. Certainly a slightly choppy day, bouncing from the lower Bianca channel at 6677 rather than the 6699 area. However, the “short the rallies” was/is still in play and saw further weakness to 6650 after the bell. The US is still a bit jittery, and investors slightly spooked. This is despite is being an election year which is usually fairly bullish, but then looking at the candidates it’s not too surprising. I am still thinking that we will see a decline towards 6600 shortly.

US & Asia Overnight from Bloomberg

Asian stocks, currencies and bonds extended losses as the prospect of global central banks turning less accommodative bolstered demand for dollars.

The MSCI Asia Pacific Index slid for a fifth day, the longest losing streak in four months. Malaysia’s ringgit led declines among regional currencies and the yen weakened as a gauge of the greenback’s strength held near a two-week high. Oil recouped some of the last session’s drop to trade near $45 a barrel and nickel rose from a two-week low. Australian and New Zealand sovereign bonds fell, tracking a slump in U.S. Treasuries.

Volatility has come roaring back in financial markets over the past week as the Federal Reserve weighs the case for a U.S. interest-rate increase at a time when the efficacy of stimulus in Europe and Japan is being called into question. A Bank of America Corp. survey showed fund managers have boosted their average cash holdings to levels near to the highest since 2001 as a record 54 percent of respondents said stocks and bonds were overvalued. Both the Fed and the Bank of Japan will hold policy reviews next week.

“Investors are waking up to the fact that valuations are high and these record-low interest rates won’t be with us forever,” said Mark Lister, head of private wealth research in Wellington at Craigs Investment Partners, which manages about $7.2 billion. “There’s a lot of event risk coming up with the U.S. election, several central bank meetings and oil prices are still looking shaky. Markets had become dangerously reliant on central bank support and this is a bit of a wake-up call that this won’t always be the case.”

Markets are losing confidence in the ability of central banks to boost inflation and there is a limit to how much quantitative easing programs can accomplish, Harvard University Professor of Economics Kenneth Rogoff said Tuesday. The European Central Bank refrained from adding to stimulus last week and the BOJ is conducting a comprehensive review of the costs and benefits of its policies.

Financial markets in South Korea are closed through the weekend and China’s are trading Wednesday for the last time this week. Industrial output figures for the euro area are due, along with U.K. unemployment data. European Commission President Jean-Claude Juncker will deliver a “State of the Union” speech to the European Parliament.

Stocks

The MSCI Asia Pacific Index fell 0.5 percent as of 1:15 p.m. Tokyo time and has dropped about 4 percent since reaching a one-year high a week ago. Benchmarks in Shanghai, Indonesia and Taiwan declined to their lowest levels in more than a month, while Japan’s Topix index retreated for a sixth day.

Banks led losses in Japan after Nikkei newspaper said the BOJ is considering delving deeper into negative interest rates, a controversial policy that squeezes lenders’ earnings. Slightly more than half the economists surveyed by Bloomberg forecast an expansion of monetary stimulus on Sept. 21.

“The limits of monetary policy are being discussed, and it’s unclear whether the situation will improve even if the BOJ does add to its easing program,” said Kiyohide Nagata, a senior global strategist at Tokai Tokyo Research Institute Co.

Futures on the S&P 500 gained 0.2 percent, following a 1.5 percent slump in the underlying index. Bayer AG is proposing an increased offer of $56.5 billion as it tries to clinch the acquisition of Monsanto Co. to create the world’s biggest maker of seeds and pesticides, according to people familiar with the matter.

Currencies

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 peers, was little changed after climbing 0.7 percent on Tuesday. Goldman Sachs Group Inc. is holding fast to a bullish call on the U.S. currency, undeterred by waning expectations for a Fed interest-rate increase this month. The yen fell 0.3 percent and the ringgit slipped 0.5 percent.

The yuan strengthened 0.14 percent in Shanghai amid speculation China’s central bank was shoring up the exchange rate before this week’s holidays. HSBC Holdings Plc said a daily fixing for the currency was set stronger than it expected on Wednesday and yuan borrowing costs jumped in Hong Kong, making its costlier to bet on depreciation in the offshore market.

Australia’s dollar advanced 0.3 percent as commodities prices stabilized. It sank 1.4 percent on Tuesday, sliding with the currencies of other resource-exporting nations as the Bloomberg Commodity Index fell 1.3 percent.

Commodities

Crude oil added 0.5 percent to $45.12 a barrel in New York following a 3 percent tumble in the last session. Industry data showed that U.S. stockpiles rose by 1.44 million barrels last week and official figures due Wednesday are forecast to show supplies rose by 4 million barrels, exacerbating a glut. Money managers have been slashing bets on falling oil prices at the fastest pace in five months before major producers meet this month in Algiers to discuss output constraints. Nickel gained 0.6 percent, after slumping almost 5 percent over the last two sessions. Mines in the Philippines, the world’s largest supplier, are being shut amid a nationwide audit of welfare and environmental standards that’s set to end this week. The government said more closures are coming and Goldman Sachs Group Inc. has warned that nickel ore stockpiles could sink to “critically low” levels by March or April 2017.

Bonds

Ten-year bond yields in Australia and New Zealand climbed at least six basis points to 2.13 percent and 2.56 percent, respectively. The rate on similar-maturity U.S. Treasuries was little changed at 1.73 percent following a six basis point gain on Tuesday.

The yield on the Bloomberg Global Developed Sovereign Bond Index climbed to this quarter’s high of 0.6 percent in the last session as Mohamed El-Erian, the chief economic adviser at Allianz SE and a Bloomberg View columnist, urged the Fed to get its next interest-rate hike over and done with. The timing would be unlikely to alter a “shallow cycle” of increases, he said.

Japan’s yield curve steepened amid speculation the BOJ will concentrate its bond-buying program more heavily on short-term securities. The five-year yield decreased 2 1/2 basis points to minus 0.20 percent, while the 30-year rate jumped as much as 10 basis points to 0.605 percent, the highest since March.

“Investors are expecting that the BOJ will adopt a more flexible stance on its bond-buying measures and couple that with an additional cut to the deposit rates,” said Katsutoshi Inadome, a senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “Superlong bonds are being sold amid speculation that’s starting to look more of a reality.” [Bloomberg]

FTSE 100 Outlook and Prediction

For today I think we might get a push up towards the 6740 area where we have the 200ema on the 30min. The daily chart is now bearish with resistance at 6780 so a swing short around here is worth a go, though i am not sure we will get that high today. You never know though as the volatility has increased so I have put it in the trade plan. The 6680 might hold as support initially as the 30min chart is showing support here. However below this then yesterdays lows at 6650, and then 6609 (10 day Bianca) are pretty likely. So for today, I am cautiously bullish, but within a bigger decline – I think we will see 6600 before long.

So, the ball is really in the bulls court to start with and they will need to be quick out the blocks this morning if we are to get any sort of rise. If the 6680 level breaks then probably worth flipping to a short to target 6650 and 6610.