6805 support, 6840 resistance

Good morning. The FTSE might not have raced higher recently like the US but its proving more resilient as well as the US rapidly gives up its gains. In fact the FTSE nearly hit the 6805 level that was support for yesterday and has bounced, managing to stay not that far off its highs, while the US throws its toys out the pram. Worried about being dragged back to Iraq probably. Unsurprisingly Mark Carney has said that interest rates might rise sooner than the city expects. I still reckon end of Q3 2014, possibly start of Q4 2014, 0.25bps, hold for 6 months, have election, another rate rise of 0.25 the quarter after that – end of Q2 2015 probably. If only there was some way to bet on your hunch ;).

The Chancellor also announced power for the BoE to cap lending on housing mortgages as a means to control sub prime, sorry I mean people over leveraging themselves and avoid a repeat of 2007. Not before time as the property bubble (apologies, its not a bubble, just strong economic recovery) could burst and derail the recovery.

The FTSE bulls failed to break the 6853 level and we have an overnight low of 6806 – turning bearish! Civil war in Iraq, Russian tanks broaching Ukraine and all eyes on the world cup in Brazil, could see the bears get control. Then of course, the superstitious ones will be jittery today being Friday 13th!

Asia Overnight from Bloomberg
Asian stocks pared declines, with oil producers surging on the highest crude prices in eight months as violence in Iraq spurred supply concerns. India’s rupee retreated and China’s yuan headed for its biggest weekly advance in almost three years.

The MSCI Asia Pacific Index (MXAP) slipped 0.3 percent by 1:24 p.m. in Tokyo, trimming its decline asJapan’s Inpex Corp. and China’s CNOOC Ltd. led a rally in energy stocks. West Texas Intermediate oil rose 0.7 percent to $107.23 a barrel. India’s rupee touched the lowest in a month. The yen dropped from the strongest this month as the Bank of Japan kept record stimulus unchanged. The yuan extended the week’s advance to 0.7 percent. Standard & Poor’s 500 Index futures were little changed.

Escalating violence in Iraq is raising the prospect of further disruptions in OPEC’s second-biggest oil producer. The BOJ will continue to expand the monetary base at the same pace, it said, a move predicted by all 33 economists in a Bloomberg News survey. China, which releases retail sales and industrial production numbers today, reported new loans that exceeded estimates after markets closed yesterday.

“The Iraq situation has the potential to become more significant, so people are naturally concerned,” saidAngus Gluskie, a fund manager who helps oversee more than $550 million at White Funds Management in Sydney. Any pullback will be limited because “the underlying factors that have driven the market higher haven’t really changed. They’re still reasonably strong.”

Energy companies were the only group to advance among 10 industries on the Asia-Pacific gauge today. The measure closed at the highest since June 9, 2008, on June 11 and climbed 4.6 percent this quarter through yesterday.

Militants Attack
Iraqi forces sought to check the rapid advance of Islamist militants who had seized major cities, as Prime Minister Nouri al-Maliki responded to the greatest threat to his government since taking power. The Shiite-led government is struggling to retain control of Sunni-majority regions, and al-Maliki’s army units in northern Iraq collapsed in the face of the Islamist advance.

‘Serious Situation’
“There’s potential for disruption to spread around the Middle East and we’re talking about significant amounts of daily supply,” Michael McCarthy, a chief strategist at CMC Markets in Sydney who predicts Brent may climb to $125 a barrel if there’s an attack on Baghdad. “The market got concerned about potential disruption in Libya; Iraq is a much more serious situation.”
President Barack Obama said he won’t rule out using airstrikes to assist Iraq’s government. Iraq “clearly is an emergency situation” and the government there needs more help, Obama said.

UK
The U.K. pound climbed 0.2 percent to $1.6964, extending yesterday’s 0.8 percent advance. Bank of England Governor Mark Carney said the central bank may raise interest rates from a record low earlier than investors expect and expressed concern that mounting debt related to the housing market could undermine stability.
Gold was little changed after jumping 1 percent, the most in five weeks, and silver held its 1.9 percent advance.

FTSE Outlook

Considering all the war tensions brewing again I am surprised gold didn’t rise more, and the FTSE drop more, when you look at the drop experienced by the Dow and S&P. It would seem then that the FTSE has been the level headed one over the recent weeks with its slow steady rise, rather then the race for the top the Dow and S&P put on. The FTSE even after all that yesterday is only 60 points away from its most recent high.

Yesterday saw the S&P breach the Raff daily channels, whilst the FTSE is still above both the Raff and Bianca channels, the latter showing support at 6813 today. The Raff channel bottom is 6805 for the 20 day and 6795 for the 10 day. So, we have decent support around the 6800ish area on a daily time frame. A break below that 6795 will invalidate any bullish tendencies for the time being I expect and means we have probably seen the highs at 6880.

Todays pivot is 6841 so as we are back below that likely to be initial resistance, and indeed tallies with the 200EMA on the 30 minute chart. A short there could be good, unless the US bulls appear off the bottom of their daily channels and really put in a stellar performance.