6770 support, 6815 resistance

Good morning. I really wanted the bulls to do more with that long from 6791 yesterday but it was very half hearted. Maybe they thought it was Monday?! Maybe today will therefore be bull Tuesday a day late? Either way it was pretty weak yesterday and overnight with 6835 not breaking and a slow decline to the support. 6770 is the line in the sand this morning that the bulls will need to defend. With gold still rising (albeit slowly) maybe we are seeing the indices topping off and we will start to get the declines over the next few months? Looking at the daily Raff channels the 20 day could be in play if 6770 breaks, which offers support at 6756 area.

The media are still talking about the housing bubble, and in fact its the lead story on the Telegraph. And only last week Dale at the BOE was saying there is no bubble in the housing market (the biggest sign of all that there probably is!).

Asia Overnight from Bloomberg
Asian stocks fell, with Japanese shares leading the regional index toward its biggest drop in four weeks, as the yen held gains versus the dollar. New Zealand’s currency weakened, while nickel and crude oil climbed.

The MSCI Asia Pacific Index slipped 1.4 percent by 1:17 p.m. in Tokyo. Japan’s SoftBank Corp., the largest investor in Alibaba Group Holding Ltd., fell 4.2 percent after the Chinese e-commerce company filed for a U.S. initial public offering. Standard & Poor’s 500 Index futures were little changed. The yen held yesterday’s 0.5 percent gain as New Zealand’s dollar fell after the central bank raised the prospect of intervention. Nickel traded near a 14-month high, gold advanced and oil in New York added 0.6 percent. Rubber slumped.

Twitter Inc. (TWTR) slid 18 percent as insider shares became eligible for sale on the same day that Alibaba filed for what could be a record stock offering. China’s services sector expanded at a slower pace, data today showed before Federal Reserve Chair Janet Yellen addresses Congress on the U.S. economy. The U.S. urged Ukraine to proceed with its May 25 presidential election, rejecting Russia’s calls to postpone the vote amid clashes in the country’s east and south.

“The U.S. economy is recovering but that isn’t enough while concerns about China’s slowing economy and uncertainties in Ukraine make investors risk-off,” said Ayako Sera, a Tokyo-based market strategist at Sumitomo Mitsui Trust Bank Ltd., which manages about $474 billion. “In this sort of risk-averse environment, Alibaba’s IPO is a negative for the market in terms of supply and demand.”

About four stocks dropped for each that gained on the Asia-Pacific gauge, which is down 3.1 percent this year. Most major indexes in the region declined today, with Australia’s S&P/ASX 200 Index (AS51) retreating 1 percent. Hong Kong’s Hang Seng Index slid 1.1 percent after a holiday yesterday.

Ukraine
Ukraine’s efforts to regain ground from pro-Russian militants in cities in the country’s east were undermined as insurgents killed four government troops and downed a military helicopter. Russia called on Ukraine to postpone its presidential election set for May 25, after its completed its new constitution.

FTSE Outlook

Its starting to look a bit more bearish with the bulls failing to break 6835 yesterday and the media still hyping up buying stocks which is always a warning sign. There is also a rush of M&A activity and IPOs – which often take place at market highs. Therefore I am in short the rallies mode for the time being and am more comfortable going short off the resistance levels mentioned. For today we have initial support at 6770, and the pivot at 6804 – so we may see an early rise as we are virtually on that support as I write this. Resistance wise, above the pivot we have 6816 then 6837 and 6850. If the support breaks then 6755, 6684 and 6650 are the next supports, the last two being a lot lower!

With my slightly tongue in cheek comment above about today being bull Tuesday a day late it will be interesting to see if the supports do hold – 6770 and 6756 – as if they don’t then we should get some strong downside momentum going over the next few weeks.

The 30 minute chart looks interesting as we are just tracking the top of a declining channel but about to encounter the bottom of the rising one at 6753 (coinciding with the 20 day Raff). We are also slightly below the 10 day Bianca (support at 6791) so there is still hope for the bulls to have one last little push. As such I’ll go long off the 6770 and 6756 areas for that last bounce but will be preferring the shorts at 6816, 6837 and 6850.