Support 5778 5760 5636 5624
Resistance 5857 5868 5876 5883 5924 5946
Market Summary for Monday
The FT100 was dragged lower by a falling oil price and broker downgrades in the banking sector. After the sharp moves up over the last two trading days it was probably inevitable that any excuse for some profit taking would kick in. There was some early buying which followed through from Friday however this quickly dried up as some traders continue to sell into any rally. Its looking like 5960 will be as high as we get on that leg up from 5600, as today I am looking at a short around the 5850 area on any early morning rise.
US & Asia Overnight from Bloomberg
- U.S. crude slips back below $30 a barrel after rebound
- Standard & Poor’s 500 Index halted two days of gains
Asian stocks fell, halting a two-day rebound, as oil slipped back below $30 a barrel and Japanese shares led losses.
The MSCI Asia Pacific Index declined 0.9 percent to 118.75 as of 9:10 a.m. in Tokyo after capping its biggest two-day rally since October 2011. The Standard & Poor’s 500 Index halted two days of gains, with declines accelerating in the final hour of trading as crude extended its selloff. While the gyrations in China’s equity market took center stage in the first few weeks of the year, the impact of the rout in oil on industrial demand, prices and economic growth worldwide is now coming to the fore, with shares and crude prices now the most correlated since 2013.
“The rally that we’ve seen looks more like a bit of short-covering,” Chris Green, an Auckland-based strategist at First NZ Capital Group Ltd., a brokerage and wealth management firm, said by phone. “This is not the time to be putting on risk. The primary risk is on the Chinese economy and how it evolves. There’s increasing uncertainty as to the ability of the Chinese authorities to arrest the volatility in their currency and equity markets. Concerns are increasing about oil’s weakness and its knock-on effects.”
Japan’s Topix index sank 1.9 percent after rising Monday to cap the first back-to-back gains this year. New Zealand’s benchmark gauge lost 0.3 percent. Markets in China and Hong Kong have yet to open, while Australia is closed for a holiday.
FTSE China A 50 Index futures slipped 0.2 percent in most recent trading, while those for the Hang Seng Index fell 0.5 percent and the Hang Seng China Enterprises Index lost 0.4 percent. The Shanghai Composite Index rose 0.8 percent on Monday as coal and steel producers climbed on a government pledge to further cut overcapacity and excess labor in those industries.
Kospi Slides
South Korea’s Kospi index slid 0.7 percent on Tuesday. The nation’s growth rate retreated from a five-year high as a surge in property transactions that supported the economy earlier in 2015 fizzled out. Gross domestic product rose 0.6 percent in the fourth quarter from the previous three months, when it jumped by 1.3 percent, data from the central bank showed.
The regional benchmark gauge has lost 10 percent this year, buffeted by concerns about slowing growth in China and the rout in oil and other commodities. The Shanghai measure is down 17 percent, while Japan’s Topix has lost 12 percent. Attention turns to central banks this week, with the Federal Reserve and Bank of Japan due to review monetary policy.
Futures on the S&P 500 index fell 0.2 percent. The U.S. equity benchmark index dropped 1.6 percent on Monday as energy shares declined.
Oil extended its decline to $29.66 a barrel before weekly U.S. government data forecast to show crude stockpiles expanded for a third week, exacerbating a global glut. Crude slumped 5.8 percent Monday after Saudi Arabia, the world’s biggest crude exporter, said low prices won’t reduce its spending on energy projects. [Bloomberg]
FTSE Outlook and Prediction
Its looking like oil is heading to $25 per barrel which will have a bearish effect on the FTSE, and a likely move down to 5600, and possibly lower is on the cards. For today, we have some initial support at 5800 as its a round number, however, with a weak overnight session I expect we will dip slightly below that to the more significant support area around 5780. If that holds then the bulls might well be able to drag it up to the 100 Hull Moving Average on the 2 hour chart which is 5857 at the time of writing (will be slightly lower later on) and the bears might well enter their shorts around this area, As such I am seeing a dip, small rise and then further downside today. I did think that the bulls would take it slightly higher yesterday from the 5870 area hence the revised short order at the 5915ish area (but they failed at 5910). It certainly looks like we are now on the next leg down, having failed to even reach 6000. If we are to reverse that position then the bulls will need this back above 6000 and then 6100. Which could be a big ask for both those levels! However, you never know and for the moment, I have support at the 5780 area and resistance at 5855 so those are the 2 areas I am looking at today.