FTSE 100 Support 6718 6709 6698 6643 6556
FTSE 100 Resistance 6746 6756 6796

Good morning. That was a great short entry we got at 6752 yesterday, though it was a bit slow to get going so probably closed a bit too early. The pivot was broken by the bears at 6711, before finding support at the bottom of the 10 day Bianca at 6690. Overnight we have had a retrace of the fall, and the FTSE 100 is back above 6700.

US & Asia Overnight from Bloomberg

Commodity stocks led declines in Asia as crude oil traded near a three-month low, while a stronger yen sent Japanese equities down for a third day. The pound fell.

Measures of Asian energy and raw-material shares retreated at least 0.7 percent, and Japan’s Topix index headed for its steepest loss since July 6. Risk appetite was stronger in Hong Kong, where gains by casino operators pushed the Hang Seng Index toward its highest close of the year. Malaysia’s ringgit slipped with U.S. crude trading near $43 a barrel. The yield on 10-year U.S. Treasuries declined as investors await central bank meetings in the U.S. and Japan this week. Sterling slid for the second time in three days.

Bank of England policy maker Martin Weale now favors immediate stimulus for the U.K. economy, the Financial Times reported. While the Federal Reserve will probably keep key borrowing costs on hold this week, economists expect the Bank of Japan to ease policy. After heightened stimulus expectations pushed global equities to their highest level of 2016 last week, energy stocks have led declines as a rebound in oil faltered on concern American producers are increasing drilling despite already abundant supplies of the commodity.

“A stronger yen and cheaper oil prices are likely to damp investor sentiment,” said Toshihiko Matsuno, a senior strategist with SMBC Friend Securities Co. “Investors are likely to zone in on individual stocks as their respective earnings reports come out.”

Stocks

The MSCI Asia Pacific Index was little changed as of 12:18 p.m. Tokyo time. Cnooc Ltd. slid 2.4 percent in Hong Kong. Among companies moving after earnings reports:
SK Hynix Inc., a supplier of memory chips to Apple Inc., fell 2.6 percent in Seoul after saying operating income fell 67 percent

Sands China Ltd. jumped 7.1 percent in Hong Kong as JPMorgan Chase & Co. said the casino operator’s second-quarter results were better than the bank had expected.
Orange SA and LVMH Moet Hennessy Louis Vuitton SE are due to release results on Tuesday.

“Earnings have been surprising on the upside, but the expectations were very low,” Thomas Poullaouec, head of strategy and research for the Asia-Pacific investment solutions group at State Street Global Advisors, said on Bloomberg Television.

The Topix dropped 1.5 percent, set for its steepest one-day decline since July 6, as Australia’s S&P/ASX 200 Index fell 0.2 percent. The Kospi index in Seoul added 0.4 percent and mainland Chinese equities advanced. Futures on the S&P 500 Index climbed 0.1 percent after the measure retreated from a record on Monday.

Hong Kong reports on trade Tuesday, and Singaporean factory output data is also due.

Currencies

Japan’s currency strengthened 0.9 percent to 104.84 per dollar, extending a 0.3 percent climb from last session, when the yen was whipsawed amid a Nikkei newspaper report that the government planned to double the amount of money planned for its fiscal stimulus package. A copy of the Japanese government’s draft stimulus plan obtained by Bloomberg shows it has called for continued cooperation with the central bank.The ringgit fell for a seventh straight day, its longest run of declines in more than a year. Other oil-linked currencies also declined, with the Norwegian krone losing 0.3 percent in a third day of losses. Korea’s won slipped 0.1 percent.

Sterling weakened 0.2 percent against the dollar to $1.3118. Weale, an independent member of the Monetary Policy Committee, has changed his mind on the timing of stimulus and now favors immediate support after purchasing managers’ indexes released Friday were a lot worse than he had thought, the FT reported.

The Bloomberg Dollar Spot Index fell 0.2 percent following a two-day gain.

Commodities

West Texas Intermediate crude rose 0.2 percent to $43.23 a barrel after sliding 4 percent over the past three sessions.

Energy analysts polled by Bloomberg expect government data to show a 2.25 million-barrel drop in U.S. oil stockpiles, a 10th weekly decrease, while gasoline inventories probably rose by 600,000 barrels.

“You can’t ignore the size of the inventory overhang,” Evan Lucas, a market strategist at IG Ltd. in Melbourne, said by phone. “The fundamentals don’t support a move up through $55 to $60 a barrel, but we’re not seeing a capitulation like we did at the start of the year.”

Gold for immediate delivery was little changed at $1,316.13 an ounce after slipping 0.3 percent on Monday.

Bonds

Yields on 10-year Treasury notes fell for the first time in three days amid renewed demand for haven assets. Rates slipped by two basis points, or 0.02 percentage point, to 1.55 percent.

In Japan, similar maturity debt fell 0.5 basis point to minus 0.245 percent, while yields on Australian government bonds due in a decade added one basis point to 1.92 percent. [Bloomberg]

FTSE 100 Outlook and Prediction

I am thinking a bit of a repeat of yesterday with a rise up the resistance levels around the 6750 area, as we have R1 at 6746 and also the top of the 30min rising PRT channel there. The 2 hour chart actually went bearish overnight after the drop down yesterday, however, the bulls are making a good job of breaking through the 6725 resistance level early this morning.

The 30min chart is favourable for longs, with support at the daily pivot at 6717 and the 25ema also at that level. If the bulls can hold the gains then we might well get a green coral appearing, also showing as support at 6717ish. So all in all, there is a set up for an early initial rise.

The bears will be keen to break 6698 which is the bottom of the 10 day Bianca, as that opens a way to 6643, so worth shorting a break of that level. Might also be worth a small long at both those levels in case they hold. We tested both the 10 day Bianca channels yesterday, the second test of them also usually holds, then the third test breaks so bear that in mind.