Have we finally found a level of support for the indices?  Since the Dow’s most recent 6 Jan 9,088 peak, it has fallen six days in a row until it bounced off the 8,000 round number yesterday and ended the day with a positive close.  This coincided with the S&P printing an intra-day low 1.5 points below its 61.8% retrace level (818.50) of the 21 Nov – 6 Jan rally and the FTSE also put in an intra-day low 3 points below its equivalent 61.8% retrace level (4,093) yesterday (although the FTSE closed before the rally kicked off in the States around 5.30pm London-time).

Secondary indicators support the idea of yesterday being a reversal day too – volume of 436 mln was the highest since the 19th December futures & options expiry day.  Also the Vix bounced off the underside of its 50-dma yesterday too, closing at 51 after an intra-day high of 55.

In the UK, the FTSE has been scared lower by rumours of an impending £20 bln ($30 bln) rights issue from HSBC.  This is the same HSBC that declined the UK Government’s offer of recapitalisation last October, stating they didn’t need the Government’s help.  BARC and STAN also declined Government help but both subsequently raised capital at a share price which represented a much greater discount to the 8.5% discount to their closing price on Friday 10th October 2008 which HBOS, LLOY & RBS secured.  HSBC closed yesterday at 547.5 pence, a 30% discount to their 10 Oct 2008 close of 790 pence.  Maybe HSBC are indeed the Seller who have been pressuring the London stockmarket.  I am not privy as to whether HSBC are going to launch a rights issue or not, but if they do then there will be a large slice of humble pie to be consumed by the poor HSBC director tasked with going cap-in-hand to the UK Government to ask for their help in underwriting this one!  Maybe the Hongkong & Shanghai Banking Corporation will ask the Chinese to part with $30 bln of their forex reserves instead.

Post Script:  On 19 Jan 2009 HSBC announced that “it could not envisage circumstances where it would ever seek capital support from the UK Government”.  They didn’t mention the Chinese…