Good morning. Well I wasn’t expected to see the bottom of the 20 day Bianca channel yesterday at 6447, but where did that bounce come from yesterday evening?! With all the Greek carry on recently China has slowly been worsening under the radar of the main headlines, but their session today was down 8%. Looks like the EU have had enough of Greece now and are saying conform of leave. It is a bit ridiculous really and I am sure lots are getting pretty fed up of it now. Even Obama chipped in yesterday and gave them all a clip round the ear with a message to sort it out. I think today will be another weak day as despite the FTSE climbing 100 out of hours last night the gains haven’t stuck. All in all, its certainly not a time for calm controlled trading!
US & Asia Overnight from Bloomberg
Asian stocks slipped into a correction, with the regional benchmark index falling 10 percent from its April peak, as Chinese shares extended a rout and European leaders gave Greece until Sunday to submit a new set of reforms.
Chinese brokerages Huatai Securities Co. and Citic Securities Co. slumped at least 16 percent in Hong Kong, leading losses on the regional benchmark index. Hong Kong Exchanges & Clearing Ltd. dropped 7.8 percent, heading for a record ninth day of decline. Fortescue Metals Group Ltd., Australia’s third-largest iron ore producer, sank 3.6 percent as the raw material used to make steel dropped below $50 a metric ton for the first time since April.
The MSCI Asia Pacific Index dropped 2.1 percent to 140.59 as of 11:11 a.m. in Tokyo. Investors are flocking to assets that offer some safety amid speculation that China’s stock rout and Greece’s possible exit from the euro are beginning to infect global markets. The Shanghai Composite Index slumped 4.7 percent, while the Hang Seng China Enterprises Index of mainland shares in Hong Kong fell 5.3 percent.
“China’s stock market rout is now spreading to other financial markets, creating a sweeping sense of panic and a liquidity crunch,” Zheng Ge, an analyst at Wanda Futures Co., said by phone in Beijing.
Greek Crisis
Sunday now looms as the climax of a five-year battle to contain Greece’s debts or see the country exit the currency union, potentially splintering a currency that was meant to be irreversible and throwing more than a half-century of economic and political integration into reverse. German Chancellor Angela Merkel conceded that she is “not especially optimistic” that a solution can be found.
“The Greece crisis has been causing volatility,” Steven Milch, chief economist at Suncorp Wealth Management in Sydney, said by phone. “A negotiated outcome is better than a chaotic outcome that might arise if they exit from euro.”
Hong Kong’s Hang Seng Index decreased 4 percent. Japan’s Topix index lost 1.7 percent as the yen gained. South Korea’s Kospi index slipped 1.1 percent. New Zealand’s NZX 50 Index fell 0.3 percent Australia’s S&P/ASX 200 Index slid 1 percent. Singapore’s Straits Times Index declined 0.8 percent.
China suspended initial public offerings and brokerages pledged to buy shares in weekend measures aimed at halting the market rout. Mainland shares posted their biggest three-week slump since 1992 on concern leveraged traders are liquidating bets after valuations exceeded levels seen during China’s stock-market bubble of 2007.
E-mini futures on the Standard & Poor’s 500 Index fell 0.5 percent today. The underlying U.S. equity benchmark index gained 0.6 percent on Tuesday. [Ref]
FTSE Outlook
Interesting week this one! Will Greece be “saved” or kicked out of the Eurozone? What does it mean for the rest of the Eurozone – beginning of the end? Spain, Italy and Portugal will be the next ones to watch, along with the UK maybe jumping ship too? Anyway, for today we have the pivot as first resistance at 6503, though I think we may see a bit of a rise towards the top of the 10 day Bianca channel at 6558 – a level that will be worth a short. I didn’t expect the bottom of the 20 day at 6447 to hold as well as it did yesterday and that rally was a little bit odd, especially out of hours. Had a feeling of “must not let it drop” about it….. Prior to the 6558 level we do have the 200ema at 6538 currently which has acted as good resistance recently – twice dropping off it this week, Monday and Tuesday. Initially I am thinking at 6479 will hold as support for a push to at least the pivot, and maybe higher. There is a fairly decent 30min channel today, with resistance at 6551 and support at 6385ish – tallying with the bottom of the 20 day Bianca again, 6388.
Looking at the 10min chart, 6470 marks the bottom of a declining channel – if that breaks then 6440, 6388 are the next supports to look out for.