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Good morning. Well the bottom of the 10 day Bianca held really well bang on 6760 yesterday after all. My long was a bit higher at 6767, and we did get a bit more upside after i closed at 6785. Despite the pre market pricing the bulls didn’t really manage to break 6809 so that is still resistance for today. On the news front housing seems to be slowing, both here and in the US, but then it needed too really. Probably means that the BoE will still be ok for a small interest rate rise at end of Q3/early Q4 rather than sooner (as I have said all along!).

Asia Overnight from Bloomberg
Asian stocks rose, sending the benchmark regional index to a six-year high, while bonds followed U.S. Treasuries lower before the Federal Reserve starts meeting today. Oil fell while New Zealand’s dollar dropped on a reduced milk-price forecast.

The MSCI Asia Pacific Index (MXAP) added 0.3 percent by 2:23 p.m. in Tokyo, with four stocks rising for every three that fell. Foreign buying pushed the Kospi gauge in Seoul toward its highest close since August 2011, while the Hang Seng Index touched levels not seen since November 2010. Standard & Poor’s 500 Index futures were little changed after the gauge ended the U.S. day up less than 0.1 percent. Yields on 10-year Australian government bonds rose four basis points. Oil fell a second day in New York and the kiwi slumped 0.4 percent.

Fed policy makers are expected to cut bond purchases for the sixth time while debating the preconditions for increasing interest rates at their two-day meeting that ends tomorrow. Housing data is due in the U.S. today, with reports on gross domestic product and payrolls also scheduled for this week. The Hang Seng China Enterprises Index yesterday capped a 20 percent advance from this year’s low.

“The equities rally will continue for the rest of the year,” Daphne Roth, Singapore-based head of Asian equity research at ABN Amro Private Banking, which oversees about $207 billion, said by phone. “We’re seeing economic growth filtering through to corporate earnings. While Fed tapering will continue, we believe the earliest interest-rate increase will only happen middle of next year. The Fed is very clear that they will only raise rates provided the economy continues to recover.”

Asian Valuations
The MSCI Asia Pacific measure trades at 13.6 times projected earnings for member companies, the most expensive valuation since December. The S&P 500 trades at 16.6 times estimated earnings and the Stoxx Europe 600 Index is at 15.4 times, data compiled by Bloomberg show. The MSCI All-Country World Index has a valuation of 15.4.

The Asia Pacific gauge is trading about 15 percent above its lowest close this year, reached in February, and gained 2.4 percent in July through yesterday.

Fed policy makers will cut asset purchases by another $10 billion to $25 billion tomorrow, according to the median of 38 economists’ estimates compiled by Bloomberg. There’s a 63 percent probability the Fed will raise interest rates to at least 0.5 percent by July 2015, based on Fed funds futures, versus a 43.2 percent chance at the end of May.

The U.S. Treasury sold $29 billion of two-year notes at the highest yield in more than three years yesterday as investors bet the economy will be strong enough for the Fed to remain on pace to raise interest rates next year.

Analysts predict U.S. stockpile data tomorrow will show gasoline supplies rose by 1 million barrels last week to the highest level since March. Nationwide crude inventories probably shrank by 1 million barrels, according to a Bloomberg survey.

Violence in Libya and Iraq isn’t affecting the flow of oil from the Middle East, with clashes between militias in Tripoli not spreading to oil-export terminals and the conflict in Iraq sparing the nation’s main oil-producing region.

FTSE Outlook

FTSE 100 Prediction

FTSE 100 Prediction

Todays pivot is 6786 so I expect that to act as support on any dip, though the bulls will be keen to break 6809 first thing this morning for a push to 6843. Below that the bottom of the 10 day Bianca is 6763, which would be the second touch after yesterday and likely to hold if it were to get that low – I don’t think it will. Bull Tuesday after all! As per the arrows I am expecting a bullish day today, initially testing that 6809, dipping back then breaking it on the next leg up. I expect that leg to reach 6843. Above that we have the top of the 10 day Bianca at 6861 and the 20 day Bianca at 6863 (near enough the same). A case of buy the dips today for a run up. Longer term the all time high at 6938 is still resistance.

I have put a long in the trade plan below from 6800 as I don’t expect it to dip down to the pivot, though I will also have a long order there and at the 10 day 6763 level as well.

Good morning. Friday was very close to the 6834 shorting area with the rise and dip playing out and we are back around 6800 as I write this. Fairly positive GDP news out last week on the UK economy, though UK companies that are reporting are likely to be effected by the double whammy of the strong pound and slowing emerging markets – more here. Having dropped back front he 6830 area on Friday, todays pivot is 6801 and likely to be initial resistance, though we are fairly mid point of the daily channels – top around 6858, bottom around 6755. The S&P failed to break the 1991 area last week and is now down at 1975. What will this week bring?

Asia Overnight from Bloomberg
Asian stocks rose, with a gauge of Chinese shares in Hong Kong heading toward a bull market, while Treasuries and oil slipped as investors await data on U.S. services before the Federal Reserve meets this week. Soybeans and corn rallied.

The MSCI Asia Pacific Index (MXAP)added 0.3 percent by 2:30 p.m. in Tokyo, following last week’s 1.4 percent advance. The Hang Seng China Enterprises Index climbed to 11,098.92, more than 20 percent above a March 20 closing low, while trading volume in Shanghai surged. Standard & Poor’s 500 Index futures lost 0.1 percent and the yield on 10-year U.S. notes climbed one basis point after the equity benchmark retreated from a record. Oil in New York and London dropped at least 0.4 percent. Soybean and corn futures jumped at least 1 percent.

U.S. reports on services activity and pending home sales are due before the Fed meets to discuss monetary policy, while Goldman Sachs Group Inc. said last week rising yields may spur a retreat in global stocks and bonds over the next three months. Chinese industrial-company profits jumped the most last month since September, data yesterday showed. Israel resumed its offensive against Hamas militants in the Gaza Strip after a lull in fighting, while the U.S. said it has photos of Russia shelling into Ukraine.

“Sentiment has turned in favor of growth and cheap valuations in the Chinese market,” said Khiem Do, who helps oversee about $60 billion as the Hong Kong-based head of Asian multi-asset strategy at Baring Asset Management Ltd. The shares have “been lagging for a long time so they’re catching up with world markets. The Fed has communicated to the market that the first Fed-fund rate hike will be more like next year than this year, so should they change their mind then that would be quite negative.”

U.S. Notes
Amazon.com Inc. drove U.S. stock declines July 25, sliding almost 10 percent after reporting the widest loss since 2012, distracting investors from an earnings season where 79 percent of S&P 500 members have exceeded analysts’ profit estimates. The benchmark U.S. equity gauge fell 0.5 percent to 1,978.34 July 25, declining for the first time in four days.

Yields on 10-year Treasuries climbed to 2.48 percent after slipping four basis points July 25. Australian bonds due in a decade paid 3.42 percent, after rates rose six basis points, or 0.06 percentage point, last week.

The gap between rates on 30-year Treasury notes and five-year debt narrowed to the least since 2009 last week as uncertainty over whether the U.S. economic recovery is on a strong footing vied with concern that the Fed may raise rates earlier than previously anticipated.

The Treasury will auction $29 billion in two-year securities today, $35 billion in five-year debt tomorrow and $29 billion in seven-year bonds July 30. It will also sell $15 billion in two-year floating-rate notes July 30.

Employers probably added 231,000 workers to nonfarm payrolls in July, after a 288,000 increase in June, according to 69 economists’ estimates compiled by Bloomberg before Aug. 1 reports.

FTSE Outlook

FTSE 100 Prediction

FTSE 100 Prediction

Initially the pivot at 6801 is going to act as resistance this morning, and it does look like we will be on for some initial downside. The bottom of the 30 minute channel is 6786, whilst the bottom of the 10 day Bianca channel is 6760. The bulls will need to break 6809 today to improve the outlook for this week for more upside, but the S&P is quite well off its recent highs now, 1975 versus 1991 last week. If the FTSE bears do start off this morning then we could dip to that 6760 area quite quickly, though there is likely to be fairly decent support at around that 6750/6760 area, so I think a long there for a bull charge could work out. I say 6751 as there is a wider 30 minute PRT channel line there as well.

I have put the main expected bounce area at 6766 though there is a change that the purple line plays out with it dipping a bit lower to that 6751, either way, I think the bulls will defend that whole area, especially as we have the 10 day Bianca channel at 6760. On the upside, if the bulls can break 6809 then we should get growth to 6844, and 6858.

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