Good morning, well slightly less “good” news on the US job front yesterday sent everything soaring, so we are back to the bad news is good and good news is good, fuelling a rise to an all-time high on the S&P. Of course what it all boils down to is QE and trying to guess when and if the Fed will start tapering. As I have said all along I think 2014 at the earliest, probably towards the end of Q1, assuming the data shows a sustainable pick up in the economies. Anyway, yesterday had a slight feel of a blow off top, especially with the price dropping back to 6675 pretty quickly after hitting the 6720. A bit annoyingly I was all poised to short at 6724 – which was the top of the 10 day Bianca yesterday and send out another SMS, having been stopped out on the earlier one. 6720 is now the resistance line for the bulls to break if they are going to go for the 6760 (top of the 10 day Bianca for today) and 6820 levels. I was cautiously bullish yesterday and still am, though I think we will start to top out soon, especially once (and if) we hit the 6800 area. With the Bianca support at 6670 (where we are as I write this) we could bounce a little from here if the bulls are going to try and build on yesterday’s gains, however if this level breaks then the bears could quite easily gain control. Its distinctly possible that 6720 was the high for the time being though.
Asia Overnight from Bloomberg
Asian stocks fell for the first time in five days while the yen strengthened and commodities slid as Chinese money-market rates surged. Emerging-market currencies rose and credit risk in the region declined on bets the U.S. Federal Reserve will hold off cutting stimulus.
The MSCI Asia Pacific Index lost 0.2 percent by 1:22 p.m. in Tokyo, erasing gains of as much as 0.5 percent. The Shanghai Composite Index dropped 1.2 percent, heading for the lowest level since Sept. 30. Standard & Poor’s 500 Index (SPA) futures decreased 0.3 percent. The yen advanced 0.8 percent to 97.39 per dollar and South Korea’s won climbed to the strongest level since January. Copper led metals lower and oil fell a third day.
China’s benchmark money-market rate jumped the most since July as the central bank refrained from adding funds to markets. Barclays Plc joined ING Bank NV in calling for a delay in Fed tapering after U.S. employers added fewer workers than projected. Data today is forecast to show consumer confidence in the euro area climbed to the highest since July 2011.
“Monetary policies will be slightly tight for the rest of the year as the pressure from rising housing prices and inflation is building up” in China, said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai.
The Shanghai Composite Index fell a second day, with the benchmark index for smaller companies tumbling the most in three months, after money-market rates jumped the most since July as the central bank refrained from adding funds to markets and corporate tax payments drained cash. The ChiNext index of small companies plunged 3.8 percent,
Fed Tapering
The Fed will probably delay the first reductions in its quantitative-easing program until March, according to a survey of economists conducted Oct. 17-18, buoying emerging-market assets. The won appreciated a second day, gaining 0.5 percent to 1,055.75 per dollar, the strongest level since Jan. 11. The ringgit rose to 3.151 a dollar, snapping a three-day drop. Thailand’s baht and the Philippine peso also advanced.
Policy makers unexpectedly refrained in September from reducing the $85 billion-a-month in bond purchases, saying they wanted more evidence of an economic recovery. Deutsche Bank AG sees quantitative easing continuing into the first quarter of next year, while Goldman Sachs Group Inc. economists said that while tapering in December “remains a possibility,” March is the most likely date.
Partially closing the government during the U.S. fiscal impasse trimmed 0.25 percentage point from economic growth in the fourth quarter and cost the world’s biggest economy 120,000 jobs this month, Jason Furman, head of President Barack Obama’s Council of Economic Advisers, said at a briefing yesterday.
FTSE Outlook
Today’s pivot is 6689 and that may act as initial resistance for the bulls, but the bigger level is 6720 being yesterday’s high. We are currently at the bottom of the 10 day Bianca channel at 6671 which if it holds opens up the possibility of 6760, being the top of the channel. It’s a pretty narrow channel though so liable to break fairly soon so a case of staying nimble. Its all boiling down once again to the “will they won’t they” taper and when. Its possible that yesterday’s high was the high for the moment, especially if 6670 area breaks. Next support after that 6646. The 30minute chart EMA’s are currently bearish so it’s a bit 50/50 if this level will hold and rebuff the downward pressure now being applied, as the SafeZone indicator is also currently bearish. I don’t think its going to be long till we get a drop down and even more so if we start hitting the 6800 area.
So, today still cautiously bullish, but looking for decent shorting points as you can see from the trade plan below. Only one long though as the 6670 area, with a stop just below the 6660 rising trend line to ride any wave up.