Good morning. Felt like the FTSE was fast asleep yesterday with not an awful lot happening. The short took at 6875 and is still running, though as you know I took some profit before the close at 6866. Its still running at the moment, as both the Bianca channels are still pretty close at 6885. The absence of much bearishness still makes me think that we will get a further push up, with 6930 the all time high a likely first stop, and then possibly 6960. However, we are below the daily pivot (6870) as I write this so there is hope for the bears yet and we may see another flat to slightly bearish day (which would be good for the 6875 short!).
Asia Overnight from Bloomberg
Asian stocks advanced, with a regional benchmark index trading at a seven-month high, and the yen and gold climbed. Oil was near the priciest since March before a report on American stockpiles, and corn extended drops.
The MSCI Asia Pacific Index (MXAP) added 0.2 percent by 1:01 p.m. in Tokyo after closing at the highest since Oct. 22 yesterday. The Hang Seng Index (HSI) climbed 0.4 percent, with gains tempered by losses in the shares of Galaxy Entertainment Group Ltd. and Sands China Ltd. after Macau blocked a payment-card system used to circumvent China’s currency controls. Standard & Poor’s 500 Index futures lost 0.1 percent after the gauge closed at a record. The yen and gold strengthened 0.2 percent. Corn slipped 0.4 percent, extending a 16-week low.
Inflation in China quickened to 2.5 percent in May, faster than the 2.4 percent median estimate of economists, as producer prices fell a 27th straight month. The People’s Bank of China announced a cut in reserve requirements for some banks yesterday. Japan reports on machinery tool orders before French and Italian industrial-production figures. Wholesale inventories data is scheduled in the U.S. with a report on mortgages.
“We’re still overweight on risk assets given the positive global growth outlook,” Daphne Roth, the Singapore-based head of Asian equity research at ABN Amro Private Banking, which oversees about $207 billion. “We certainly like the North Asian markets since they’re much more leveraged to increasing exports. Time is ripe for a small correction as the market has gone up so much.”
Gold for immediate delivery climbed to $1,254.51 an ounce after touching a four-month low last week. Aluminum, nickel and tin fell at least 0.4 percent in London.
The S&P 500 and the Dow Jones Industrial Average both rose 0.1 percent yesterday to record highs. The U.S. stock market is at its calmest in about seven years, after the Chicago Board Options Exchange Volatility Index fell 5.9 percent last week to 10.73, the lowest level since February 2007. Thegauge climbed 3.9 percent yesterday to 11.15.
Yields on 10-year U.S. Treasuries were little changed at 2.60 percent, after rising two basis points, or 0.02 percentage point, in New York. The extra yield demanded on the notes over their Group of Seven counterparts climbed to 70 basis point yesterday, the most since April 2010, after the European Central Bank introduced negative deposit rates and a raft of new stimulus last week.
Investors should go “maximum underweight” U.S. debt because of the relative strength of the U.S. economy, Matthew Hornbach, global head of interest-rate strategy at primary dealer Morgan Stanley, wrote in a note to clients yesterday. Federal Reserve Bank of St. Louis President James Bullardsignaled yesterday that the improving U.S. economy may spur policy makers to raise interest ratesearlier than forecast.
I am still running half the short from 6875 having taken a little bit off before the bell yesterday. My target is 6847 now. That is the first support level I have for any possible dip initially, with 6840 and 6814 below that. If the bears really went for it then the bottom of the daily Bianca channels at 6800ish (6796 and 6806 for 20 day and 10 day respectively), though given how weak the bears have been such a drop might not happen at all! On the upside we have the daily pivot at 6870 today (we are below that as I write this so technically speaking its bearish), then 6885 which is the top of both Bianca channels. It still looks like the bulls want the 6930 all time high, though maybe not today. They will need to break 6870 first. I feel that with the price flat lining we may see a little bit of a pullback from these levels before an assault higher. Will need to see if 6840 holds today or not.
I have put a few options in the trade plan below, couple of longs off the supports and a couple of shorts off the resistances as there are a few options that could play out today.