6635, 6622, 6604 support, 6654, 6665, 6674 resistance

Good morning. Just went a little early with the SMS yesterday at 6610 and the long at 6623, as we had the bottom support level at 6590 hold instead. Since testing that level we have put in a decent bounce, and with the ECB and BOE later, might have a bit of a positive day. Rates aren’t likely to change, but with France opn the ropes, Italy back in recession, Draghi might just say something positive for markets. Maybe another “do whatever it takes” statement. Tensions between the West and Russia still persist which weighed on markets yesterday – tit for tat over sanctions still going on. I think we could see a rise to the 6665 level initially today.

Asia Overnight from Bloomberg
Asian stocks fell, with the regional benchmark index heading for an almost six-week low, as tensions mounted over Ukraine and casino shares slumped.

The MSCI Asia Pacific Index (MXAP) dropped 0.4 percent to 145.63 as of 11:56 a.m. in Hong Kong, set for the lowest close since June 27 and extending its three-day loss to 1.5 percent. The U.S. has joined NATO and Poland in warning there’s a risk Russia could send troops into Ukraine.

“This is an undefinable event with an undefinable outcome for markets,” Evan Lucas, Melbourne-based market strategist at IG Ltd., wrote in a note. “Ukraine will remain a focal point for the remaining months of 2014.”

Russia will ban billions of dollars of food imports from the U.S. and other nations in retaliation for sanctions imposed over the turmoil in Ukraine. Russian President Vladimir Putin yesterday ordered restrictions on imports for one year from countries that have imposed or supported sanctions against Russia, according to the Kremlin website.

Regional Gauges
Japan’s Topix (TPX) index dropped 0.4 percent after the yen gained 0.5 percent against the dollar yesterday. South Korea’s Kospi index fell 0.5 percent. Taiwan’s Taiex index was little changed.Singapore’s Straits Times Index declined 0.4 percent. Hong Kong’s Hang Seng Index slipped 0.5 percent, while China’s Shanghai Composite Index retreated 0.6 percent.

Australia’s S&P/ASX 200 Index dropped 0.1 percent. The nation’s jobless rate rose to 6.4 percent in July, a 12-year high, the statistics bureau said in Sydney today. That compares with the median 6 percent estimate in a Bloomberg News survey of 24 economists. New Zealand’s NZX 50 Index was little changed.

Futures on the Standard & Poor’s 500 Index added 0.1 percent today. The measure closed flat yesterday as declines in Sprint Corp. and Time Warner Inc. on merger news offset gains in consumer shares.

China releases July trade data tomorrow, with export growth forecast to have decelerated to 7 percent as imports expanded 2.8 percent, down from 5.5 percent in June, according to a Bloomberg survey of economists.

Of the companies on the Asian stock gauge that released quarterly results from the beginning of July through yesterday and for which Bloomberg had estimates, 59 percent beat earnings expectations.

The Asia-Pacific gauge traded at 13.5 times estimated earnings as of yesterday compared with 16.1 for the S&P 500 and 14.9 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Support so entry levels for a possible long

• 6635 daily pivot
• 6622
• 6604
• 6596
• 6583

Resistance so entry levels for a possible short

• 6654
• 6665
• 6674
• 6716

FTSE Outlook

The drop and bounce to 6590 looked a little bit engineered looking back. The supports at 6600/6623 should have held really and I actually didn’t expect to see the 6590 level which is why I only mentioned it once in yesterday’s email. Anyway, there was lots of talk of the S&P dropping to 1888 but with it bouncing off 1908 I have a feeling we might be in for a bit of bull now. There is a fair bit of news releases out today with the ECB and BOE as well as Spain and Germany industrial data.

We have the top of the 10 day Bianca channel at 6674 for today, however prior to that resistance is at 6654 and 6665 – the latter looking likely to get hit as we have the 30min 200EMA there and also the top of that declining 30min channel. As such i have gone for a short order there, with the stop just above the 10 day Bianca channel. I think initially these levels will hold as resistance, a dip to the pivot (we have just broken through that as I have been writing, its at 6635) and then further rises this afternoon.

If I am wrong and it gets bearish, support after the pivot is at 6622, 6604 and 6596, possibly as low as 6583.