Good morning. Well, just when you think is that the low then around 6300, Sunday night sees 6240! Whilst this volatility is good for running a position it does make it hard to get an SMS out as a level gets hit! Anyway, the market is full of fear at the moment, with the Eurozone “staring into an abyss” to coin a phrase from the weekend papers. Will the UK be dragged down or will the usual thing happen and it shakes off the fears and climbs a wall of worry again. The fact is the Eurozone hasn’t ever really recovered – France is still sick, Germany isn’t booming, the hanger ons are still mired in debt. Despite the UK “doing best of the G7”, real wage increases are non existent (though I see the heads of the FTSE100 companies have had a good year). The main worry is deflation still, across the board, with Ebola thrown in for good measure.
Asia Overnight from Bloomberg
Asian stocks fell with U.S. equity-index futures (DJA), extending a rout that wiped $1.54 trillion from global shares last week, and sovereign bonds rose amid concern that pledges to keep record-low interest rates won’t counter a global slowdown. The dollar dropped while gold gained.
The MSCI Asia Pacific excluding Japan Index fell 0.8 percent by 12:35 p.m. in Hong Kong, heading for its lowest close since March. Standard & Poor’s 500 Index futures lost 0.6 percent and the Bloomberg Dollar Spot Index retreated 0.4 percent. The yen strengthened to a three-week high as gold jumped 0.8 percent. Brent crude extended last week’s slump, sliding toward an almost four-year low. Ten-year Treasury futures climbed to an 11-month high and Australian bonds rose.
Stocks have fallen on concern that valuations are too high as the Federal Reserve removes stimulus and economic indicators from China and Japanto Germany signal weakness. U.S. rate rises could be delayed by slowdowns elsewhere, Fed Vice Chairman Stanley Fischer said at the weekend, and Fed Governor Daniel Tarullo said he’s worried about global growth. China reported stronger-than-estimated trade data today, while in Hong Kong, police removed some roadblocks as protests enter a third week.
“People are worried about the fourth quarter and beyond,” said Ryan Huang, a strategist at IG Ltd. in Singapore. “China data today came out better than expected but there’s too much negativity outweighing it. Investors are going to look for more positive indicators before we get any traction.”
Futures on the Dow Jones Industrial Average dropped 0.5 percent to 16,353. The index slid 2.7 percent last week, the most since August. That was less than the S&P 500’s 3.1 percent slump, the worst weekly loss since May 2012. Nasdaq 100 Index futures due in December declined 0.7 percent to 3,827.
Technical Levels
Contracts on the S&P 500 slipped to 1,884.1 today, trading around levels closely watched by chart analysts. The S&P 500 December contract closed last week at 1,894.3, about 3 points below its lowest close from August and less than two points above the intraday low of 1,892.9 on Aug. 7. The 200-day moving average was 1,887.5 at the end of last week.
“I don’t think we’ll get a monster selloff because the trend, the 200-day moving average, is still rising,” Walter “Bucky” Hellwig, who helps manage $17 billion as a senior vice president at BB&T Wealth Management in Birmingham, Alabama, said by e-mail before the start of U.S. futures trading. “However, if the futures deteriorate all night with no bounce higher, and we go into trading tomorrow morning still down and falling, watch out.”
Risk ‘Underpriced’
Goldman Sachs Group Inc. Chief Risk Officer Craig Broderick said markets will see a shock that will expose liquidity and other risks that aren’t apparent today. Investors across assets classes don’t understand that crises occur periodically and “when they do, they’ve significantly underpriced risk,” Broderick said Oct. 11 at an event sponsored by the Institute of International Finance in Washington.
Ebola
A health-care worker in Dallas was confirmed at the weekend to have contracted Ebola after being in contact with an infected patient there, raising the possibility other caregivers could have been exposed to the disease. Ebola’s arrival in the U.S. “hasn’t helped sentiment recently,” Greenwood Capital’s Todd said.
FTSE Outlook
The live charts pivot is 6366.8 today, whilst the IG one is 6332. With a decent looking 10 minute channel in play, also with resistance there I think that is a better place to go short for a run down to that 6230 area, possibly lower. It certainly all looks bearish still, with gold daily trends turning up as well. The slight glimmer of hope is if the S&P finds support at 1887 – the 200dma. It has hit that overnight and seen a small bounce, helping the FTSE off that 6240 overnight low. I have plotted the arrows on the 10min chart today, mainly as it has that channel on it, and also the SMA’s are currently showing a little bit of bull potential, at least initially. All in all, it still is pretty messy, but as the market always likes to turn when everyone is bearish (or bullish) then be on guard! On the 30minute chart the EMAs are still bearish and have been for a few sessions now, sentiment won’t change until the 10 crosses the 25.
The bulls will need to get prices holding above 6320 really, to try and target a rise to 6410 today or tomorrow, but that 6330 area is likely to cause a headache for them. I have put another sizeable dip down from there to the 6230 and possibly lower 6213 (s2 level) though a lot will depend on the US for the next few sessions, though it is a holiday there today so volumes are likely to be light. The bottom of the Raffs are 6145 and 6115…..