Good morning, well that’s it, I guessed right for once and no tapering yet. As would be expected the indices took off, with the FTSE only stalling at the 6640 level mentioned yesterday and where my arrow terminated. That’s the resistance now though we should see more bullishness, I expect a little dip back to 6600 before a further assault on the highs. The US markets closed at their all-time highs yesterday. Pretty much every took of – gold, indices etc. though the counter argument is that if they don’t feel they are able to taper QE yet then the recovery isn’t that strong and the economy still cannot support itself. When Ben Bernanke announced possible tapering of QE and the markets tanked in the spring it was said at the time it was all data dependant, a fact that seemed to get overlooked. I said at the time I doubted that the data would be that strong within a few months to enable withdrawal, however, I think tapering is more likely in 2014, possibly a small reduction in December just before Ben hands over the reins of the Fed chairmanship.
Yesterday’s trades both worked out but only for a combined 30 points (the long from 6572 then the short at 6555), not too bad but I didn’t trade over the news in the end and just sat on the side-lines.
Asia Overnight from Bloomberg
Asian stocks jumped to a four-month high, bond yields and credit risk declined while industrial metals rallied after the Federal Reserve unexpectedly refrained from reducing U.S. economic stimulus. The Thai baht strengthened the most in six years.
The Federal Open Market Committee said it wants more evidence of an economic recovery before paring its $85 billion-a-month bond buying program, surprising analysts who predicted a $5 billion cut to Treasury purchases. Japan’s exports rose the most since 2010 in August, boosting Prime Minister Shinzo Abe’s growth drive. The U.S. will post jobless claims and home sales figures today.
“It’s taper off, risk on,” said Keith Poore, head of investment strategy at AMP Capital Investors Ltd. in Wellington, which manages about $130 billion. “You want to hold on to your risk positions if you have them at the moment.”
Fed Outlook
Fed Chairman Ben S. Bernanke said there is no fixed schedule for tapering, which could still start this year should data confirm the central bank’s “basic outlook.” Economists had forecast the FOMC would dial down monthly Treasury purchases to $40 billion from $45 billion and keep buying of mortgage-backed securities at $40 billion, according the median of estimates compiled by Bloomberg.
Outlook
Fairly simple plan today – dip and rise. We have the 30 minute channel bottom at 6612’ish, more significant support at 6600, markets buoyed by more QE and no reason really why the FTSE can’t go for that 6690 later on today. The only slight concern is as mentioned above, if QE is still needed then the economy is weak. But then we all knew that anyway. I have put the trade plans below for today, the initial short might not be from 6640 if the weakness kicks in straight away, but either way we “should” get a bounce around the 6600 area. The trends are still up with the 10 and 20 day Bianca channels now both showing 6550 as the bottom of the channels.