Support 6626, 6616, 6604, 6585, 6550 Resistance 6649, 6671, 6685, 6708, 6713

Good morning. Well that was a rather interesting Thursday session; 6595 held though after that initial rise off the 6614 area I didn’t expect dip back to test the 6610 area for that long. It dipped below and looked like the bears were going to go for it, but that 6595 support line held and 6640 was back on the screen in short order. But….. 6649 still hasn’t broken, so that is initial resistance for today. Bit of a gloomy report from Bloomberg here – “World Outlook Darkening as 89% in Poll See Europe Deflation Risk”. All in all yesterday was again bit of a range bound session with neither the bears nor bulls taking charge. Looking at the longer term charts, the Dow, S&P and FTSE are looking a little toppy at the moment.

Asia Overnight from Bloomberg
Chinese shares retreated on the last day before a link between the Shanghai and Hong Kong bourses begins. The dollar rose to a five-year high versus major peers as U.S. oil headed for its longest weekly losing streak since 1986 and gold fell.

The Shanghai Composite Index slipped 0.9 percent by 2:40 p.m. in Tokyo, and a gauge of Chinese shares in Hong Kong fell 0.7 percent. The Bloomberg Dollar Spot Index rose 0.3 percent as the greenback bought as much as 116.29 yen, the most since October 2007. West Texas Intermediate oil extended its weekly loss after closing at a four-year low yesterday. Gold declined 0.6 percent. U.S. equity-index futures were little changed.

Data Nov. 17 may show Japan’s economy returned to growth in the third quarter, amid reports that Prime Minister Shinzo Abe will call an early election to secure support for postponing a sales-tax increase. Euro-area gross domestic product and inflation reports are due today with U.S. retail sales figures. With Group of 20 leaders preparing for this weekend’s summit in Australia, a Bloomberg Global Poll showed international investors believe the world economy is in its worst shape in two years.

“The U.S. dollar is broadly stronger, and the dollar-yen is probably leading that,” said Sean Callow, a currency strategist at Westpac Banking Corp. in Sydney. “Most likely the sales-tax hike will be delayed, and that’s probably going to be well received by Japanese equities because it effectively removes the otherwise highly likely prospect of a negative quarter of GDP next year.”

Stock Link
Chinese stocks fell amid concern recent rallies were excessive. The Shanghai Composite Index pared this week’s gain to 2.2 percent, while Hong Kong’s Hang Seng China Enterprises Index trimmed its advance since Nov. 7 to 1.8 percent.

Bourses in the two cities will begin trading through the new link, known also as Stock Connect, on Nov. 17. The new link will allow a net 23.5 billion yuan ($3.8 billion) a day of cross-border purchases, with trading in companies listed in Shanghai on the SSE 180 Index and SSE 380 Index as well as shares on the Hang Seng Composite LargeCap Index and Hang Seng Composite MidCap Index in Hong Kong. Stocks with dual listings are also eligible.

The dollar gained 0.4 percent to 116.22 yen and is up 1.4 percent this week, a fourth straight gain. The Bloomberg Dollar Spot Index, which tracks the dollar against 10 of its most-traded peers, advanced to as high as 1,098.26, the highest level since April 2009.

Crude Slump
The U.S. currency strengthened 0.3 percent against the U.K. pound and South Korean won and gained 0.5 percent versus the Australian and New Zealand dollars. The euro weakened 0.4 percent to $1.2427 before gross domestic product reports from across the region today.

West Texas Intermediate crude for December delivery dropped 0.6 percent to $73.81 a barrel in electronic trading on the New York Mercantile Exchange. The contract slid $2.97 to $74.21 yesterday, the lowest close since September 2010. Prices have fallen for seven straight weeks, a slump unmatched since March 1986.

Falling prices reflect a widening consensus that the Organization of Petroleum Exporting Countries will maintain output, according to Goldman Sachs Group Inc. Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI, increased to the highest level since May, a U.S. government report showed.

Record Retreat
Brent for January settlement rose as much as 66 cents, or 0.9 percent, to $78.15 a barrel on the London-based ICE Futures Europe exchange, before paring its gain to less than 0.1 percent. The December contract expired yesterday after dropping $2.46 to $77.92, the lowest since September 2010. Front-month prices are down for an eight week, the longest run of declines since trading began in 1988.

Gold bullion for immediate delivery fell as much as 0.7 percent to $1,154.83 an ounce, before trading at $1,155.58. The metal is down 1.5 percent this week, according to Bloomberg generic pricing. Holdings in the SPDR Gold Trust, the largest exchange-traded product backed by the metal, shrank to a six-year low of 720.62 metric tons yesterday, contracting for an eighth day.

Global demand for the yellow metal slid 2.5 percent in the third quarter from a year earlier to the lowest level since 2009, the World Gold Council said yesterday.

Russia’s central bank bought more gold than all other countries combined during the period as it seeks to build defenses against sanctions levied in response to its support for rebels in eastern Ukraine. The ruble is the worst-performing major emerging-market currency in the world this year.

FTSE Outlook

A Friday after a weird small ranging week – could be tricky today! Initial resistance is at 6649 and we have failed to break above that so far, though with 6633 breaking (not that convincingly) there is still a bullish bias. The top of the 30 minute channel has resistance just above this level at 6653, so we may well get a dip from here to start the day off, before a rise back. If the bulls manage to break 6649 then I expect we will get a rise to the 6671, and possibly 6685 area, where I have layered in a couple of shorts. Slightly reduced risk though as its Friday. We have Eurozone GDP out at 10 so that will move things around bit, especially if it reinforces this view of a weak Eurozone (see link to Bloomberg article in opening paragraph). We also have retail sales in the US out at 13:30 which will also create some movement, to see if consumer confidence is still strongish. Anyway, back to the levels, support wise today we have the daily pivot at 6626 to start with, then 6616 below that. I think that area might hold, but if not then 6605 and 6585 are the next areas of support. The 6585 being the bottom of both the Bianca channels so in theory decent support. We are looking a little overbought at the moment on a bigger picture so I am still expecting a bit of a pull back at some point, though it seems to be the thing that never comes (will happen when none expects!). If the 6685 Bianca support go then i wouldn’t rule out a test of the 25ema on the daily at 6530. Don’t think it likely today but above 6685 the top of the Bianca channels are at 6710ish (if it did get here then this is a decent shorting area).