Well, the FTSE hasn’t gone quite as I predicted a couple of weeks ago, but it did hover around the 6450 level for a few days before dipping below. It is now rebounding after the Republicans offered to do a deal on the debt ceiling and has reached the twenty day moving average. It may pause here briefly before making further gains, possibly reaching 6800, but I still think it unlikely that it will break out of its 6000-6800 range yet. Even if the president accepts the deal, there is still QE taper talk to keep a lid on gains. Realistically, the PotUS has to agree to the Republicans’ offer as they have backed down on Obamacare and have manoeuvred him to where he would be responsible for the default if no deal is done. That deal is only temporary though, to allow for negotiations on more general spending cuts to the budget, which will also give stock markets reason for some trepidation.
A few weeks ago I forecast the FTSE to return to 6000 in a couple of months, but it looks like that will be put off until the new year. Hopefully, by then, the us budget will be sorted out and the focus will be back on the taper, which everyone has forgotten about for now. Some commentators have been talking about a one-off reduction in QE which doesn’t progress, but the last FOMC minutes still indicated that the Fed wants start the taper this year and to reduce QE to zero next. That would give the stock market plenty to get the jitters about.
