Good morning I hope you had a good weekend. Start of a new month and the penultimate one for the year end. October ended on a slightly bearish note, with the FTSE dropping off from its recent highs after nearly challenging for 6500. The break below 6345 on Friday makes things look a bit bearish on the daily chart, but we do have the bottom of the 20 day Bianca at 6330, pretty much where we are as I write this. The Dow has certainly dropped off from the 17750 area now, though it did of course pop a little bit higher than that in what looked to be a bit of a fake move (RSI, Stochs and MACD were all bearish, so bearish divergence while it rose above 17750). HSBC announced a $6.1bn profit for the third quarter, which should help buoy up the financials this morning on the FTSE. The ASX200 (Australia) was bearish today which could well follow through to the FTSE (or maybe just a rugby reaction?!)
US & Asia Overnight from Bloomberg
Asian stocks dropped, after their best month since May 2009, as industrial companies led losses following data signaling a contraction in Chinese manufacturing.
The MSCI Asia Pacific Index fell 0.5 percent to 133.77 as of 9:01 a.m. in Tokyo. The measure rallied 8.6 percent in October as China cut interest rates and the European Central Bank hinted at potential extra stimulus, while U.S. and Japanese policy makers kept their monetary policies accommodative. China’s first key indicator this quarter, an official factory gauge, missed analysts’ estimates, signaling that the manufacturing sector has yet to bottom out as global demand falters and deflationary pressures deepen.
“I’m struggling to see catalysts to encourage the market to take this rally to the next level,” said Tony Farnham, a strategist at Patersons Securities Ltd. in Sydney. “China’s PMI numbers were underwhelming. Manufacturing will probably remain weak as China tries to rebalance its economy away from manufacturing and into services.”
The purchasing managers’ index was unchanged at 49.8 in October, the National Bureau of Statistics said Sunday, compared with the median estimate of 50 in a Bloomberg survey. The non-manufacturing PMI, a barometer of services and construction, fell to 53.1 from 53.4 in September, the weakest since December 2008. Final numbers for the private Caixin China factory PMI are due Monday, with economists surveyed by Bloomberg projecting a reading of 47.6.
Japan’s Topix index slid 1.4 percent after the yen gained 0.4 percent against the dollar on Friday. While the BOJ refrained from easing monetary policy last week, the Nikkei newspaper reported that the government may introduce additional budget measures if third-quarter gross domestic product, which will be announced on Nov. 16, shows the economy needs aid.
South Korea’s Kospi index added 0.2 percent. Australia’s S&P/ASX 200 Index lost 0.6 percent and New Zealand’s NZX 50 Index was little changed. Markets in China and Hong Kong have yet to start trading.
Futures on the China A50 index fell 0.2 percent in most recent trading, while contracts on the Hang Seng China Enterprises Index lost 0.4 percent. The Shanghai Composite Index posted its biggest monthly advance since April as the Chinese government took measures to end a $5 trillion rout and policy makers introduced stimulus to boost economic growth.
E-mini futures on the Standard & Poor’s 500 Index dropped 0.2 percent. The underlying gauge of U.S. equities slipped 0.5 percent on Friday as weaker-than-estimated quarterly results weighed on financial and consumer staples shares.
European Central Bank President Mario Draghi said that it’s still an “open question” whether stimulus needs to be increased to bolster the economy. [Bloomberg]
FTSE Outlook
As its the start of the new month I expect that we will get an initial rise with the influx of new cash, however there is some quite strong resistance levels at around the 6360 area so we may well then mimic the Australians today and see some weakness creep in. The 2 hour chart is looking a bit bearish at the moment, with resistance at the 6375 level, and with the daily pivot at 6365 this could be the area that the bulls run out of steam today. The 200ema on 30min is currently at 6380, so that will also be resistance at that sort of level as well. Poor data out of China (PMI figures showed factory production declining again) is also likely weigh on investors mind again, and we all remember the reaction last time everyone though China was slowing down. So for today, it looks bearish really, and shorting the rallies after an initial bit of a rise looks is my plan.
Morning chaps,couple of bits of info….HSBC 3rd quarter 6.1 billion profits beating estimates and Nissan reports second quarter net income of 172.8 billion yen beats estimates……source Bloomberg.
Morning,HSBC are tempting at this price…again 🙂
I think they traded about the £6.50 mark in May June time £5.03 ish now but I’m sticking to indices.
I trade them quite often.I expect they will be higher by the end of the month,although the numbers today are flattered by reduced fines and cost cutting.Citi have a 2.60 target on Centrica that is about actual cash flow increases I expect they will be higher by the middle of the week.Assuming no general slide.
This Dax 10900 area seems to be keeping us in no mans land with the FTSE a bit more pessimistic than the rest again.
I think patience is the key WSF.just wait and let the market come to you.have you broken that Dow hedge?
No.I’ve been tempted a few times,I think this is basically bullish to 2017,there is a wall of worry with War and Refugees etc etc and we arent really reacting to it. Dow weekly S & R, cup and handle?? 🙂 I havent got other trades supporting it though which I would normally have,so I’m thinking of it like a Share trade now,adding as the trend is confirmed,watching the basic SMA’s.Been reading a lot about stats with Indicators and S/L rate and it’s making me more careful with this.
eg my favourite Candlestick indicator (failed recently with HSBC) has an 8 in 10 success rate according to Bulkowski and a system with 65% win rate has a 22% chance of 5 successive losing trades,that kind of stuff is making me more aware of risk and wait for confirmation.
You might well be right about it being bullish till 2017 but with a couple of big drops of maybe 1500 points plus on the Dow over the next year or so.I think some market news is going to give it a big push up and I think it’s going to be QE4 introduced in the states to fend off deflation. I can’t see Interest rates going up myself,there’s too much debt.