Good morning.
Market Summary for Friday
After some tough trading times the FT100 moved up for a couple of days last week, mainly on the back of higher oil prices and stimulus talk from the ECB. The 5900 level still seems very low when viewed in the longer term but for the moment it seems a satisfactory closing level at the end of this week.
Oil companies were some of the biggest gainers with most sectors rising, however commodity shares did lag a bit. The positive for the day is that shares rose into the close which means traders are less nervous about holding over the weekend so we can take some confidence from this, certainly for the next couple of days which are likely to see a bit more upside. However, I think, if we manage to reach the 6050 area then the bears are going to reappear and are certainly not done yet with taking the FTSE down lower – I am still thinking 5400 is on the cards.
US & Asia Overnight from Bloomberg
- Measure of global shares gained most in 3 1/2 years on Friday
- Investors awaiting decisions this week from Fed, BOJ
Asian stocks extended the rally that sent global equities to their biggest gain in 3 1/2 years as Japanese shares and materials companies climbed.
The MSCI Asia Pacific Index added 0.5 percent to 119.07 as of 9:02 a.m. in Tokyo, with materials and health-care shares leading the advance. Japan’s Topix index climbed 1.1 percent as markets across the region extended gains that began after European Central Bank President Mario Draghi signaled it may boost economic support. Bank of Japan Governor Haruhiko Kuroda, who decides on policy on Jan. 29, played down the impact of recent market gyrations on his economy, while traders are predicting the Federal Reserve will hold interest rates when it also meets this week.
“There will be some waiting and seeing among policy makers until they know how this market volatility will affect the global economy,” Michael McCarthy, chief strategist at CMC Markets in Sydney, said by phone. “Given the depression in the markets, there’s scope for the market to add to Friday’s gains. We’ve got a very eventful week, with the BOJ and Fed meetings, so there’s a lot for investors to react to. Volatility is likely to continue.”
A measure of volatility on the MSCI Pacific Gauge climbed to the highest since September last week, while the Shanghai Composite Index swung between gains and losses every trading day. Japan’s Topix surged 5.6 percent on Friday after losing 6.4 percent the previous two days.
The MSCI Asia Pacific Index is still down 9.7 percent this year, while the Shanghai Composite Index has tumbled 18 percent as investors retreat from riskier assets on concerns about China’s economic slowdown and a rout in oil and other commodities.
South Korea’s Kospi index added 0.4 percent on Monday. New Zealand’s benchmark gauge rose 0.7 percent and Australia’s S&P/ASX 200 Index increased 1.1 percent. Markets in China and Hong Kong have yet to start trading. Futures on the Hang Seng and Hang Seng China Enterprises indexes gained 1.3 percent in most recent trading, while contracts on the FTSE China A50 Index futures rose 1.2 percent.
Chinese stocks rallied on Friday as energy producers surged on higher oil prices and after the government signaled it will curb overcapacity in industries such as coal that have been dragging down economic growth. The Shanghai Composite Index rose 1.3 percent, while the Hang Seng China Enterprises Index climbed 3.4 percent.
Futures on the Standard & Poor’s 500 Index slid 0.1 percent on Monday. The U.S. equity benchmark index advanced 2 percent Friday, the most since Dec. 4, while the MSCI All-Country World Index posted its best day since June 2012.
Energy shares advanced in Asia as oil fluctuated near $32 a barrel following the biggest two-day rally in more than seven years. [Bloomberg]
FTSE Outlook and Prediction
Looking at the Bianca chart we are above both the 10 and 20 day channels, which suggests that this rise has come a little bit too far too fast, and a dip back down to within the channels is likely. However, the daily RSI(10) is only at 51 so that isn’t quite as overbought as yet. I have gone for a slightly bullish day today with a retest of the 6000 level, despite the fact that we are just nudging the 5950 20 day Raff channel resistance. The FTSE has dropped off a bit from the 5960 are overnight but not by much, and we are coming off the back of a strong Asia session. Its managed to come from 5600 to 5950, so might just want to recapture 6000, even briefly. I still think the bears are just hanging back and regrouping waiting for their chance later this week. The 30min and 10min charts are both positive for some early upside, however, looking at the 2 hour chart we haven’t yet had a dip back to test the 100 hull MA yet since crossing to bullish on 21st Jan. Support for that is around the 5808 area as I write this – a level I don’t think we will see today though bear it in mind. If we do drop down the 5980/90 area where we have the daily pivot and some PRT support and it holds, then I think that we will see a rise from there up towards the 6020 and 6050 levels – and I expect that we will start to see some bears appear at this level. However, if 5880 breaks then a dip to 5810 is likely, so flip to short on a break of the daily pivot. I am also watching 5929 quite closely which is the 25ema on 30min as that is current support, a break of that is quite bearish.