Still no deal… Will there be an 11th hour one? Or zoom over the cliff?

Good morning. Slightly frustratingly the short at 6560 got stopped out at 68 only for the FTSE to then drift all the way down to 6520 which was a little frustrating, especially as the high was only 6570. Last night the bottom was 6520, not quite reaching the 6490 pivot area in the end, but its pretty choppy as the shambles that is the US debt negotiations continue – they will really need a deal today if they are to avoid a default. Fitch credit rating threatened to downgrade America from its triple A credit rating, with further delays to raising the debt limit damaging the countries credibility. You would expect them to agree something today as the risk of default surely outweighs political posturing! But then again….. Either way it makes it even more of a gamble for us as prices

As a slight aside Royal Mail has been going pretty well but I think a small short around the 501/2 area might be good. There was actually a ghost spike last night on the chart down to 435 (that would therefore be the target for the short). Small investors are sitting on a decent profit but lots are unable to sell yet as they haven’t received share certificate numbers – always a bit suspicious! Anyway, I think a lot of people piled in at the end for a quick buck so will be looking to sell ASAP. Coupled with a bit of strike action looming we might see a bit of a correction.

Asia Overnight from Bloomberg

Asian stocks swung between gains and losses as U.S. lawmakers resumed talks to avoid a default ahead of tomorrow’s deadline to raise the debt ceiling.

The MSCI Asia Pacific Index fell 0.1 percent to 141.24 as of 2:11 p.m. in Tokyo, after swinging gaining 0.2 percent. About five shares declined for every four that rose on the gauge, which is trading near a five-month high. Senate leaders have restarted negotiations to find a solution that would reopen the government and prevent default, according to an e-mailed statement from a spokesman of Republican Senator Mitch McConnell.

“The leaders in the Senate are optimistic and that’s keeping the markets supported.” Chris Weston, chief market strategist at brokerage IG Ltd. in Melbourne, said by phone. “It’s all very confusing and extremely frustrating. There’s not a lot of clarity now, so people are probably going to stay on the side-lines until we get something more meaty on the bone.

McConnell and Senate Majority Leader Harry Reid ‘‘are optimistic that an agreement is within reach,” a spokesman for Reid said in a statement. Earlier today, they had suspended their talks, while House of Representatives postponed a potential vote on a plan to reopen the government and increase the debt ceiling minus Republican conditions.

U.S. Futures

S&P 500 futures advanced 0.5 percent today. The U.S. equity gauge slipped 0.7 percent yesterday as the absence of a deal to raise the $16.7 trillion U.S. debt limit spurred a surge in Treasury bill rates. With the U.S. borrowing authority set to lapse tomorrow, Fitch Ratings put the world’s biggest economy on watch for a possible credit downgrade, citing lawmakers’ inability to forge a deal.

House Speaker John Boehner, a Republican, was making a last-minute attempt to influence the outcome of the fiscal showdown with a proposal that would extend government funding through Dec. 15, compared with the Jan. 15 threshold included in the Senate’s plan.

Fitch US Rating

Fitch could strip America of its prized “AAA” credit rating within weeks, the rating agency has warned, amid heightening fears that the world’s largest economy is headed for a default.

The ratings agency believes the country will raise its $16.7trn debt ceiling in time to ensure it can keep up with interest payments on its sovereign debt, but said the ongoing political stand-off in Washington was “casting doubt over the full faith and credit of the US” regardless.

If the US does default, Fitch warned it would downgrade American bonds from AAA to B+, the highest rating it will award any security that defaults but is expected to make a “swift full or near recovery”.

FTSE Outlook

Possible FTSE trade plan, but it all depends on the US
Possible FTSE trade plan, but it all depends on the US

As I mentioned yesterday with the US up in the air it makes it a lot harder for us, and I imagine a lot of traders will be sat on the side-lines waiting for some more certainty. You would think that the US would be able to reach a deal, and its looking like it will be right at the last minute otherwise the fall out is going to be pretty big. Or is it? Maybe this game of brinkmanship will play out differently and there won’t be a last minute deal as has been the case in the past. Markets have been pricing one in for the past few sessions but that doesn’t mean to say that there will be one. Which kind of fits with the daily channels – a rise today up to the 6590 area before falls. And if there is no deal, then those falls could be pretty sharp and hefty. Which would be handy to be on the short side for! The stumbling blocks for the bulls today are 6560, 6580, 6595.

68 Comments

  1. I went long on FTSE @ 6560 last night and shorted DAX @ 8860 at the same time.
    Yesterdays low was taken out on the FTSE, so technically its now in daily downtrend. With what’s happening across the pond, anything can happen…
    Would be great if we could hit 6590 so I can just run with the short on Dax..

  2. I was thinking of waiting for $ES_F (S&P Futures) to hit the 1670sh mark, then if seen go long on the FTSE and sell on any Rally due to a deal. The rally side of things in the event of a US deal looks too obvious, do people think it will happen?

    1. There are lots of people expecting a crash, best to trade with the trend.
      Weekly chart is up
      Daily chart is down.

        1. Well, I held from 6510 to 6518 to get my 60 quid to recover and booked, like you say, the profit. Reasons: 200 MA above on 10 min, crossed down MA on 1 hour, needed to recover losses on a high stake position.
          However if I didn’t need to recover my losses (morning losses by the way) badly I would have still held probably on stop loss 6504 or so but being alert to close any time.

  5. Don’t see this dropping below 6500 Hopefully get the deal in US sorted today so that we can get to 6600

        1. Coming towards 2:30, might see a bit of drop before some more rise. Still holding longs, target @6554

  15. W t f day like this. I could have got all my money back. Pure stupidity and “recovering losses” stops me from making a profit.

  16. I think they big boys know whats going to happen, otherwise we wouldn`t see this kind of movement leading up to tomorrows announcement…

  19. Made a cool 600 quid 🙂
    Closed Gold at the right time(Probably, i should have left it would have made more) – made a tide sum!
    Went long in FTSE this morning (still on) – cool sum.
    Went long in US30 just when massive spike kicked in @£10/point – wicked sum 🙂
    I think thats it for me today.

    1. Once the DOW starts gets moving, after those quick sells I presume kicked in, we should see 6600 =)

  21. If only everyday could be like this….went long at 6530 got stopped out- went long at 6508 had a little woke up about 10 minutes ago closed my position immediately! 😀 should i call it a day??

  25. Well after not been able to hit a barn-door last week with some horrible losses…a total of 224-points today in profit, across FTSE and Cable. Smiling today for once!

    Now out for the evening, not sure which way this will open.

  26. As mentioned earlier expecting a relief rally today and tomorrow upto possibly 6650. After that it should dip to current levels in the lead upto November’s FOMC and then long after that right through to the first week in Jan.

  27. I think we won’t get much movement after tomorrow’s possible decision, as most of it has already been made the last few days. Regardless should drop next couple of weeks. I hope you cash in javed, as I guess you had Christmas come early for your longs

    1. My strategy is to hold till early next year and that is what I’m going to do. May lose a bit – but maintaing trading discipline is important – otherwise the psychological damage is too great. The fewer trading decisions that you have to make the better.
      Currently long at effectively 6425. Therefore if there is a dip to below 6350, which I’m not expecting, I will buy. Otherwise holding out for another 1-2% here to round off what has been thankfully a pretty good year.

  32. i hate when my orders arent triggered even though the value goes below the target..why does this happpen?

  37. Deez if 6559.3 was ig chart price post 4:30pm when ftse spread is 2 pts, then buy prices would have been 6560.3… You missed by 0.3pts! Unlucky!

  38. Is 6559.3 the lowest bid mid or offer price? I suspect you missed out by .3 to 1.3 points as Al says.
    We are all guilty of it but try not to place limit orders at round numbers. You would be amazed how much a few pips either way can make.

    Ahwab – well done!

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