6758, 6733 Support, 6782, 6807, 6846 Resistance

Good morning. End of July already, doesn’t time fly! The 6767 area held as support fairly well ultimately reaching the 6800 before dropping off again, so gained a few points on the long trade from there. Initially the market reacted favourably to the further tapering announced last night, but has dropped back again overnight, 6780 as I write this. The bulls looked like they were going to break 6809 yesterday to push to the 6846 area yesterday but failed, though that level still remains as possible for today, mainly if 6758 holds. Argentina was declared in default yesterday by S&P as well.

Asia Overnight from Bloomberg
Asian stocks outside Japan fell, with Hong Kong’s Hang Seng Index retreating from a more-than three-year high, as Samsung Electronics Co. led information technology shares lower.

The MSCI Asia Pacific excluding Japan Index dropped 0.4 percent to 510.32 as of 11:53 a.m. in Hong Kong, paring its monthly advance to 3.3 percent. The MSCI Asia Pacific Index, which included Japan, slipped 0.1 percent to 149.33 after climbing 2.6 percent this month through yesterday, when it closed near the highest level since June 2008. It is poised for a third month of gains.

“‘The market is due for a slight pullback,’’ Desmond Chua, a strategist at CMC Markets in Singapore, said by phone. ‘‘There are concerns about geopolitical flare ups and the timing of U.S. interest-rate hikes as the Fed nears the end of quantitative easing.’’

Taiwan’s Taiex index declined 1.1 percent. The nation’s economy expanded 3.84 percent in the second quarter from a year earlier, preliminary figures from the statistics bureau released today showed. That compared with the median estimate for 3.2 percent by 26 economists in a Bloomberg survey.

Regional Gauges
South Korea’s Kospi index fell 0.4 percent after yesterday closing at the highest since August 2011. Hong Kong’s Hang Seng Index (HSI), which yesterday reached the highest since November 2010, slipped 0.1 percent, reversing an earlier gain of 0.7 percent. The FTSE Bursa Malaysia KLCI Index dropped 0.1 percent.

Japan’s Topix index climbed 0.3 percent after the yen weakened by the most in four months yesterday. Singapore’s Straits Times Index rose 0.8 percent and Australia’s S&P/ASX 200 Index gained 0.2 percent. New Zealand’s NZX 50 Index and China’s Shanghai Composite Index were little changed.

The MSCI Asia Pacific Index (MXAP) traded at 13.7 times estimated earnings yesterday compared with 16.5 for the Standard & Poor’s 500 Index, according to data compiled by Bloomberg.

Asian Earnings
Of the companies on the Asia-Pacific benchmark gauge that have posted results since the beginning of July and for which Bloomberg has estimates, 60 percent beat earnings expectations.

Futures on the S&P 500 fell 0.1 percent today. The U.S. benchmark index closed little changed yesterday as data showing better-than-forecast economic growth was offset by weaker earnings and the Fed’s decision to keep trimming asset purchases.

A Commerce Department report showed gross domestic product expanded at a 4 percent annualized pace in the second quarter, confirming the Fed’s view that a first-quarter contraction was transitory. The median forecast of 80 economists surveyed by Bloomberg called for a 3 percent expansion.

Policy makers tapered monthly bond buying to $25 billion in their sixth consecutive $10 billion cut, staying on pace to end the purchase program in October. Fed officials led by Chair Janet Yellen are stepping up a debate over when to raise interest rates for the first time since 2006 as unemployment falls faster than expected and inflation picks up toward their 2 percent goal.

The Fed said the labor market still has plenty of room for improvement, even after a surprising drop in unemployment.

Argentine Default
‘‘The U.S. economy is recovering and the Fed is still concerned about unemployment,” Kirk Hartman, Los Angeles-based chief investment officer at Wells Capital Management, where he helps oversee about $331 billion, told Bloomberg TV. “I don’t see inflation on the horizon, so there’s no real impetus for rates to increase any time soon.”

Standard & Poor’s declared Argentina in default on its foreign-currency obligations after the government missed a deadline for paying interest on $13 billion of restructured bonds. The South American country failed to get the $539 million payment to bondholders after a U.S. judge ruled that the money couldn’t be distributed unless a group of hedge funds holding defaulted debt also got paid.

FTSE Outlook

FTSE 100 Prediction
FTSE 100 Prediction

We are pretty much on todays pivot at 6782 as I write this, with it acting as resistance. If we drop off from here then next support is 6758, 6764 possibly (bottom of the 10 day Bianca channel), with 6733 below that – a level where it “should” bounce. 6807 is still resistance, with 6846 above that. The Bianca channels are showing slightly higher at 6857 and 6878 but I doubt it will reach that high today. I think it will struggle to break 6850. Initially today I think we will see a dip to that first support before a bounce back, though probably only to the top of the 30 minute channel you can see below.

93 Comments

  1. Have an order placed at 6720. If this rectangle breaks, meaning that the channel from JUL 10 was broken (+-6759), the target should be 6720+-

    1. Now that the FOMC is out of the way, with no rate hikes for considerable time, despite a slight hawkish reference…we should focus again in the background sentiment, which started to turn red 2 days ago and it seems it has not stopped yet…

  10. Dimp, your yesterday’s call to 6720 was a valid call, should have waited till 7:30pm for entry.

  13. FTSE reacting to a trend line from a longer term at 6740+-(just slightly above the 100DMA) , I had drawn in my chart months ago, but not very trusty, as it was broken once and regainned…

  15. Wanna see some headlines about an Europe QE. NExt week will see what Draghi has to say

    1. The 100 ma in the 4 hour IG chart is supporting…and slope turned positive yesterday since the last leg up to 6870.

    2. marco, looks like 58 has become resistance now.. i am looking to come out of long. just my view

  21. All the indices are down except for ftse. What’s holding it up. I have added few more shorts. So heavily shorting now.

    1. 6715,8 more precisely. But now have deleted. Another move there and FTSE will go to 6707 and from there we are in the same pattern some months ago with FTSE playing 2x below the 200 dma

  31. Today has just been a trending day…. Would not of matter if news was bad or good market would of still sold off.

  33. Bankers are beginning to panic — their easy money supply is being gently strangled. How can they possibly survive normality = NO QE?

  34. Bankers are worried about inflation…. Europe= deflation US= inflation …. Market was due a pullback.. Think if anything this is healthy.

  35. Just added to my longs at 16662 and 6719.

    PMS/JIM
    Dow looks like its Brocken down heading to 16453 do you agree this could be possible..??

    2. Hi Marco — I think it’s a down breakout OK, where it ends I do not know! I doubt that anyone has a recipe for engineering the transition from massive inflation of bank balance sheets without huge fallout. Reality is beginning to confront a bloated system.

  36. So far so good. SPX reacting well to 1940. DAX will explode to upside at least 6525.

  38. If things get nastier, I already have 1910 order placed in SPX. That I think will be the next leg

    1. You are right. Was just trying . Stopped out at b/e.
      Now will see how US closes. If in the lows or it bounces.

  42. Hmmm. My huge apple profit has been hammered and just had to average down my Dow position. Not the day to be without signal!

  46. Remember this happened only a few weeks ago then pop! Pretty decent pull back from the highs on Dax and S&P

  51. Btfd time, closed my shorts(with 20% still running on DOW). Heh, I had a point on DAX since 10000ish(closed out for £422, felt good)first time DOW has done one of those since sept/Oct last time. Gl everyone, Javed prolly too busy counting his profit to post on here…

  56. Chinese data out tonight if that comes in strong then relief rally tomorrow well at least too job figures come out.

  64. X2 have seen these drops before dax now lost 700 points in the last four weeks but have seen the dax go up 800 points in 2 week… Globally with many problem this has weighed on indices but until such times as there is a rate hike then I can only see these indice going back up, just getting the timing right for the buys and sell … Sold the dax from 10000 but closed at 9750 so kicking myself now.. Now buying the dax at 9400 so already running a loss but reckon that all these indice will soon find support.

  65. Smoking supports/indicators thrown out on these days. People just panicking and banging that sell button, more sentiment than anything else…these are the worst days for day traders.

  67. Ahwab yes these days don’t happen that often but when they do it can cause carnage still I suppose the bears would say the same when indice rally for a couple of days make 400 points plus let’s see what tomorrow brings. Gl all.

  69. I had to sell Apple today to release equity. Gutted as I was up significantly a few days ago and was looking at $105 target price. Now in heavy loss on Dow and went into Dax and S&P in last half hour of trading. In a month we won’t believe we had the chance at these prices. Ftse stood up well today.

  70. Wow just got back to see Dow didn’t bounce. Got closed out of all my positions lost 20 points on FTSE but lucky I brought my stop up to break even on bounce from 16662 to 16680.
    When you look at the Dow daily that 200 ma 16450 is like a magnet looks like we will hit if tomorrow for a monster bounce. If not the tide has finally turned ..for the bulls..

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