6861 support, 6906 resistance

Good morning. I think this week will mostly be known as range week, and a very small range at that! Not a lot happened yesterday after that initial dip down to the supports levels at 6865 and 6855, but then fortunately we had a little rise in the afternoon, despite the USA looking a bit bearish with the S&P dropping off the 1900. The FTSE just afield to reach the 6892 level (it got 6888) but well done those that held those 2 longs till the late afternoon.

The FTSE stayed up pretty well considering the US shed quite a few points (Dow was -100, S&P -10), which makes me think as long as the support levels hold today we will get one last leg up, though the bears are starting to wake up now.

We are still having fairly positive news out of the UK so won’t be long before interest rate rises are brought in (despite what was said yesterday about there being no rush). I am thinking a small one (.25bps) at the end of Q4 2014, then another small one 6 to 9 months later, after the election would be the most likely path.

Asia Overnight from Bloomberg

Asian stocks slid from a four-month high as the yen held gains and Japanese companies including Sony Corp. forecast weaker earnings. Bonds rose as central banks signal additional stimulus is needed while nickel slumped.

The MSCI Asia Pacific Index lost 0.3 percent by 1:37 p.m. in Tokyo, after yesterday closing at the highest since Jan. 13. Japan’s Topix gauge dropped 0.7 percent while Standard & Poor’s 500 Index futures were little changed after the underlying gauge slipped from a record yesterday. The yen held near the highest in almost a week at 101.87 per dollar. South Korea’s government bonds advanced, sending the 10-year yield to a six-month low. Nickel dropped the most since 2011 and oil fell.

Financial companies led declines in Tokyo after the nation’s three biggest banks all projected lower profit even as Japan’s economy expanded at the fastest pace since 2011. Central banks remain in focus, with Bank of Japan Governor Haruhiko Kuroda speaking in Tokyo and Federal Reserve Chair Janet Yellen giving an address in Washington after saying last week the U.S. economy still needs support. Data on U.S. inflation, factory output and the job market is due, along with euro-zone gross domestic product.

“U.S. sentiment and the yen continue to dictate markets here,” said Toshiyuki Kanayama, a Tokyo-based senior market analyst at Monex Inc. “It was about the time for U.S. stocks to take a breather after extending record highs.”

European Easing
Asian emerging-market bonds rose after bets Europe will ease monetary policy drove global bonds higher yesterday. Yields on 10-year South Korean government bonds slid to the lowest level in more than six months and Taiwan’s notes due in a decade fell to a nine-month low.

The European Central Bank is preparing multiple measures against low inflation, Executive Board member Yves Mersch said yesterday. The U.S. 10-year yield yesterday dropped to the least since Oct. 31, while German rates also fell.

Yellen is due to address the U.S. Chamber of Commerce today. The U.S. recovery is uneven and the economy still requires support, she said in testimony to Congress last week. While data show growth in the second quarter, many Americans are still unemployed and inflation remains slow, she said.

FTSE Outlook

Only ended up with the 2 longs yesterdays as it didn’t reach the shorting level at 6892, let along 6905. I am still favouring shorts at these levels so will short with a bigger stake than a long for example, as looking at yesterdays action cross the pond the US bears are certainly starting to emerge. For the FTSE, support is is 6860 and 6850, as well as the Bianca 20 day channel bottom at 6854, so longs off this support area should be okay as I am thinking we will get one more leg up after that dip yesterday (based on the US markets). We have decent support, there is a pretty decent 30 minute channel in play, and the FTSE held up well despite the US lowing biggish yesterday, so there are certainly the foundations /reasons for it to go a little higher today. I don’t think we will just get one headline here in the UK about the FTSE being at a 14 year high and then it dips. While its up here i think it will at least want to test the all-time high, if for no other reason to generate some good publicity for the economy (cynic that I am!).

Todays pivot is 6870, right where we are as I write this, but i have put in an initial little dip to the 6860 support, before a rise to the 6880 and 6906 area. 6906 is the top of the Bianca 10 day channel. If the US does push on for another leg up then that could tally with the top of the 20 day Bianca channel and 20 day Raff at around 6960. The 10 day Raff is currently at 6927.