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Good morning. Well that was a bit of a surprise this morning to wake up to a +85 FTSE amid a report that Japan’s $1.2 trillion Government Pension Investment Fund will increase holdings of equities. Yesterday dipped a bit further than expected, right down to perfectly test the 6381 bottom of the 10 day Bianca so well done those that nailed that entry. I was far too early with the 6436 one, though it did bounce a bit to start with. The morning was certainly bearish, but the US had to save face and couldn’t have a dip after canning QE so we got the afternoon rise for yet another V shaped day. We have now had a full crossing of the 10 day Bianca channel and are above resistance at 6531, so I wouldn’t be surprised to see some profit taking and shorting of this rise.

Asia Overnight from Bloomberg
Asian stocks rose after the U.S. economygrew faster than forecast and amid a report that Japan’s $1.2 trillion Government Pension Investment Fund will increase holdings of equities.

The MSCI Asia Pacific Index (MXAP)climbed 0.4 percent to 140.82 as of 9:01 a.m. in Tokyo, before markets opened in China and Hong Kong. The gauge has advanced 2.4 percent this week, the first back-to-back weekly gains since August, after the Federal Reservesaid it will end its quantitative easing program as the world’s largest economy strengthens.

The American economy expanded at a more-than-estimated annualized rate of 3.5 percent last quarter, capping its strongest six months in a decade, while other data showed fewer Americans filed applications for unemployment benefits over the past month than at any time in more than 14 years.

“Stronger than expected U.S. GDP growth was good enough to remind investors that the early stages of rate increase cycles are usually good times for stock markets,” said Ric Spooner, Sydney-based chief market analyst at CMC Markets Plc. “It’s providing a solid end to the trading week.”

Japan’s Topix index gained 1.1 percent. The nation’s public pension fund, the world’s largest, will today boost its allocation targets for local and foreign stocks to 25 percent each, and reduce domestic debt to 35 percent, the Nikkei newspaper reported.

Australia’s S&P/ASX 200 Index rose 0.5 percent. South Korea’s Kospi index advanced 0.2 percent and New Zealand’s NZX 50 Index added 0.5 percent.

FTSE Outlook

FTSE 100 Prediction

FTSE 100 Prediction

Well today is going to be interesting… I wouldn’t be surprised if we dip a bit from 6585 now we have come this far. We have broken above the Bianca channels, sitting around 6435 area, and the bulls are holding on to the gains ok so far. If they manage to break 6585 then that does change things slightly as it makes things a lot more bullish, and the drop potentials for the near term are invalidated. Above 6585 we have the 10 day Raff at 6606 (theses were levels I was expecting to be typing today!). Support wise, back test of the 6535 Bianca channels is the first level to watch for (we are not far above these), while the pivot at 6442 would be next. 100 point drop this morning is possible given the volatility. It will be interesting to see how long this bullishness lasts….. Its Friday so likely to be slightly odd, but i would be looking to short at 6565 and 6585. If it were to get very bearish, then 6395, 6355 and 6330 are the levels to watch.

Support so entry levels for a possible long

  • 6535
  • 6501
  • 6442 daily pivot
  • 6395
  • 6370
  • 6355
  • 6335

Resistance so entry levels for a possible short

  • 6570
  • 6585
  • 6606

Good morning. Well we got the rise to 6460, and a little bit further to 6475 which is now initial resistance. As expected the Fed has stopped the QE program, markets initially had a muted reaction, so i closed the short from 6460 for a few points, only to see it dropped to 6430 later on. Still, with big news sometimes its better to be out wanting to be in, than in, wanting to be out! Since that drop to 6430 it has bounced back and actually looks like we will get a bit of a repeat today with a push up to 6495 where there is the top of the 30 minute channel, and the Bianca 20 day at 6506. Interestingly the S&P dropped off from the 1991 area but 11 points and has stayed down. As per yesterdays email we were looking at 1986, possibly a spike to 2000, so that 1991 might be it for the moment… today will reveal all!

Asia Overnight from Bloomberg
The dollar climbed to a four-week high after the Federal Reserve judged the U.S. economy strong enough to end its asset-purchase program. Metals and oil fell with Hong Kong stocks.

The Bloomberg Dollar Spot Index gained 0.2 percent by 3:08 p.m. in Tokyo, with the euro weakening 0.3 percent and South Korea’s won leading emerging-market currencies lower. Gold dropped 0.4 percent and nickel slumped 2 percent. West Texas Intermediate crude oil slid 0.4 percent. Hong Kong’s Hang Seng Index dropped 0.5 percent after its biggest two-day rally in seven months. Standard & Poor’s 500 Index futures were little changed.

The Fed cited job gains in its decision to wind up the unprecedented bond-buying program, which has suppressed U.S. yields and fueled capital inflows into emerging-market assets. Officials retained a commitment to keep key interest rates low for a “considerable time.” An update on third-quarter U.S. gross domestic product is due today, and euro-area confidence data is scheduled before inflation tomorrow, when the Bank of Japan will report on monetary policy.

“The U.S. currency is back on its uptrend,” said Imre Speizer, a markets strategist at Westpac Banking Corp. in Auckland. The Fed statement “was a hawkish surprise to the market.”

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major currencies climbed to 1,071.85, the highest since Oct. 3. The gauge added 0.6 percent yesterday, snapping a three-day drop as the end of quantitative easing spurred traders to boost bets that U.S. rates will be increased next year.

Yen, Pound
Fed officials said in their statement that “solid job gains and a lower unemployment rate” since their last meeting in September allowed them to end quantitative easing by the end of this month. A range of indicators suggested that “underutilization of labor resources is gradually diminishing,” modifying earlier language that referred to “significant underutilization.”

The yen fell 0.2 percent to 109.09, and touched the lowest level since Oct. 7, and the euro slid to $1.2598. The pound bought $1.5973, a two week low. Hungary’s forint and Turkey’s lira retreated at least 0.2 percent.

South Korea’s won weakened 0.8 percent to 1,055.6 after climbing the previous three days.

The S&P 500 lost 0.1 percent yesterday. Concern that Europe is slipping into a recession and China’s economy is slowing just as the Fed ends bond buying sent the U.S. gauge down 7.4 percent through Oct. 15 from a record high reached mid September. The gauge then rallied 6.6 percent through Oct. 28 after Fed Bank of St. Louis President James Bullard said officials should consider delaying the end of QE amid the global concerns.

U.S. GDP
The value of global equities fell by more than $680 billion this month after slipping $1.8 trillion in September, data compiled by Bloomberg show.

U.S. GDP probably rose an annualized 3 percent last quarter, after expanding 4.6 percent in the previous three months, according to the median of 87 economists’ estimates compiled by Bloomberg before today’s data. Euro-region economic, industrial, consumer and services-sector confidence reports are due today, while Germany will update its jobless rate.

Yields on 10-year Treasuries fell 1 basis point today, paring yesterday’s two basis point, or 0.02 percentage point, gain. Similar maturity Australian government bonds paid 3.33 percent today, up four basis points .

Brent Oil
West Texas Intermediate oil slipped to $81.87 a barrel after gaining 1 percent yesterday on signs of slowing growth in U.S. crude inventories. An Energy Information Administration report showed stockpiles rose 2.06 million barrels in the seven days ended Oct. 24, following a combined increase of 21 million in the previous three weeks.

Brent crude dropped 0.1 percent to $87 per barrel in London. It reached a two-week high yesterday after OPEC’s Secretary-General said the recent plunge in oil prices doesn’t reflect the balance between supply and demand.

Hong Kong’s benchmark gauge closed at the highest level since Sept. 24 yesterday. A measure of Chinese companies in the city slid 0.9 percent today after a 4 percent gain through the previous two days. The Shanghai Composite Index climbed 0.9 percent.

Housing Support
China will support consumption in six industries including real estate development as growth in the world’s second-biggest economy slows, the nation’s cabinet said after a meeting yesterday. China will “stabilize” housing-related consumption and relax conditions under which tenants can use their provident housing funds, the State Council said in a statement. It didn’t provide further details of planned property-support measures.

Gold slumped to $1,206.74 an ounce after sinking as much as 1.6 percent to $1,208.50 last session, its lowest intraday price since Oct. 8. Silver retreated 1.2 percent. [from here]

FTSE Outlook

FTSE 100 Prediction

FTSE 100 Prediction

That short didn’t go quite according to plan really though it did get a few points on the board. 6471 was the top of the Bianca 20 day for yesterday so dropped off a little bit from there before bouncing back. Initially today it looks like we will get a push up to 6495, and the 20 day channel is 6506 today. A short around this area could be good, and we have had a decent bounce from the recent lows, with the 10 day channel on both Raff and Bianca now heading up, but encountering the longer term resistance around 6500 (6488 for 50 day, 6506 for 20 day). That said the S&P struggled to hold onto that rise to 1991, so if that starts to drop then it will drag the others down. The dollar (cable) has also strengthened , dipping below the 16000 level which could weaken the FTSE if it falls further.

Initial resistance is at yesterday high at 6475, if broken then we should reach that 6495 level. Todays pivot is 6444 so we have initial support there, and a level that we are not actually far above as I write this, so the bulls will want to be quick out the blocks, as a break below the 6436 level risks a dip to 6415 and 6381 where there is the bottom of the 10 day Bianca and 20 day Raff. If 6495 were to be broken (unlikely I think) then 6534/6547 is a likely resistance level.

Support so entry levels for a possible long

  • 6444 daily pivot
  • 6436
  • 6416
  • 6381

Resistance so entry levels for a possible short

  • 6475
  • 6495
  • 6506
  • 6534

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