Good morning. I hope you had a good weekend. Fridays rise stalled at 6774 so thats the line in the sand for the bulls today, though I think we might well get to the top of the 20day Bianca channel around 6807 shortly. I am expecting a little bit more bull, then a dip (looking at the S&P a dip down to the 25ema on daily around 2025) then further rises. I have actually seen some very bullish articles that reckon we are possible in for a monster bull run, starting now. Be handy for the global economy.
Asia Overnight from Bloomberg
Asian stocks rose, with a regional gauge heading for its biggest advance this month, after U.S. indexes reached another record as China’s unexpected interest-rate cut stoked optimism in the global economy.
In Sydney, BHP Billiton Ltd. (BHP), the world’s biggest mining company that gets about 35 percent of revenue from China, jumped 3.9 percent and Fortescue Metals Group Ltd. climbed 8.9 percent, rebounding from losses the past two weeks. China Vanke Co., the nation’s biggest homebuilder by sales, surged 6.8 percent in Hong Kong, pacing gains among mainland developers. China Railway Construction Corp. gained 1.7 percent after winning $1.98 billion worth of contracts in Saudi Arabia.
The MSCI Asia Pacific excluding Japan Index climbed 1.2 percent to 479.04 as of 9:48 a.m. in Hong Kong, heading for its biggest advance since Oct. 29. China reduced interest rates last week, joining the European Central Bank and the Bank of Japan in deploying fresh stimulus. That contrasts with the Federal Reserve, which has ended its bond-buying program as the U.S. economy strengthens. ECB President Mario Draghi said Nov. 21 he will do what is necessary to spur inflation.
“The rally in Chinese shares will continue following the rate cut,” Nader Naeimi, who helps manage about $125 billion as head of dynamic asset allocation at AMP Capital Investors Ltd. in Sydney, said by phone. “Central banks can be aggressive in cutting rates because inflation isn’t an issue. We have been getting surprises from central banks. There’s a good chance we’ll see a move from the ECB soon.”
Hong Kong’s Hang Seng Index jumped 1.9 percent, heading for its biggest advance since Sept. 3, while the Hang Seng China Enterprises Index of mainland shares traded in city surged 2.6 percent. The Shanghai Composite Index added 0.7 percent.
Stimulus Magic
China cut benchmark interest rates for the first time since July 2012 as leaders step up support for the world’s second-largest economy. The one-year lending rate was reduced by 0.4 percentage point to 5.6 percent, while the one-year deposit rate was lowered by 0.25 percentage point to 2.75 percent, the People’s Bank of China said on its website on Nov. 21.
“Stimulus has been the magic fix for equity markets over the past six years and the mere sign it will eventuate is enough to be championed by the markets,” Evan Lucas, a market strategist at IG Ltd. Melbourne, wrote in a note to clients. “We now have three of the four largest central banks in the world actively stimulating their respective domestic economies.”
Regional Gauges
South Korea’s Kospi index gained 0.7 percent and Australia’s S&P/ASX 200 Index jumped 1.1 percent. Taiwan’s Taiex index rose 0.4 percent, while Singapore’s Straits Times Index added 0.3 percent. New Zealand’s NZX 50 Index fell 0.1 percent. Japanese markets are closed for a holiday.
The Hang Seng Index sank 2.7 percent last week, the biggest weekly decline since March, as stock investors left 76 percent of the Shanghai-Hong Kong exchange link’s quotas unfilled during the first week of trading.
Futures on the Standard & Poor’s 500 Index were little changed today. The U.S. equities benchmark advanced 1.2 percent last week, reaching an all-time high, as data from labor to housing added to signs the recovery in the world’s biggest economy is strong enough to weather weakness overseas.
FTSE Outlook
So, for the moment it still looks bullish, despite the pullback from the highs on Friday. Todays pivot is 6735 so we have initial support there and if that holds then I feel that we will be following that rising 30 minute channel which has main resistance at 6785 to start with. As mentioned above I do think that we will be testing the top of the 20 day Bianca channel (we nearly reached 6785 on Friday which was the channel top then) soon, and I think the market might well take a little bit of a breather end of November, early December before the “Santa Rally” kicks in and then continues. Irrespective of that, swing trades off the daily channels, long or short, are still worth doing, I do think that the S&P is going to have little dip, as it still hasn’t tested the 25ema on daily since crossing over to bull, which it would ideally do. that level is 2026 for the moment.
If the FTSE pivot does hold then a rise to the 6800 level might start to stall around that area. Below the pivot there is support at 6699 where we have the bottom of the 10 and 20 day Bianca, 200ema on 30min and the bottom of that aforementioned 30min channel. Worth a long here if it dipped that low.