Good morning. Well a pretty bearish day in the end yesterday, typically just missing the shorting area at 6670 I mentioned before dropping to a low of 6515. Typical! We had brief respite at the 6530 area where I took that risky long which saw a small bounce of 20 or so, before the bears came out again. For today 6520 looks to be the key area, if we break that then we could be on for the bigger dip to near 6400 mentioned last month. If it holds then we could pretty easily head towards the year-end target I have of 6800. It could well hold as we are still testing the bottom of the various daily channels and such a sharp drop on nothing major news wise is probably manipulated before a rise.
Asia Overnight from Bloomberg
Asian stocks fell after the yen strengthened and valuations on the regional equities gauge climbed to a six-month high, with investors awaiting U.S. job data this week that may provide further evidence as to when the Federal Reserve will reduce stimulus.
The MSCI Asia Pacific Index slid 1 percent to 140.33 as of 2:12 p.m. in Hong Kong, with all 10 industry groups on the gauge falling. More than $8 trillion has been added to the value of global equities this year, the most since 2009, as central banks took steps to shore up economies worldwide. Fed policy makers meet Dec. 17-18 after minutes of their last meeting in October showed they may reduce $85 billion of monthly bond buying should the U.S. economy improve as they anticipate.
“Valuations have made equities, along with precious metals, the asset class most vulnerable to the early stages of a change in monetary policy,” Ric Spooner, Sydney-based chief market analyst at CMC Markets, said in an e-mail. “Buyers are becoming circumspect at current valuations and are prepared to wait for pullbacks before adding to portfolios.”
The MSCI Asia Pacific Index gained 9.6 percent this year through yesterday as central banks boosted stimulus to support growth globally and China’s economy showed signs of stabilization. The gauge traded yesterday at 14 times estimated earnings, the highest level since May, compared with multiples of 16.2 for the Standard & Poor’s 500 Index and 14.9 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
Futures on the S&P 500 Index added less than 0.1 percent.
The Commerce Department will release data tomorrow on new U.S. home sales and the central bank will publish its Beige Book, which provides policy makers anecdotal accounts of business activity from the Fed districts. Reports on third-quarter gross domestic product and November non-farm payrolls are also due this week.
U.S. employers probably hired 181,000 workers in November after adding 204,000 in October, according to a Bloomberg News survey of economists before the Labor Department report Dec. 6.
With prices testing the bottom of the various daily channels and after the drops to start December I am still expecting a bounce, which may come today. We have already started that as I have been writing this, climbing towards the daily pivot at 6553. I expect a pause here, possibly 6558, and then if we get another dip, a buying level at 6520 could present itself. Yesterday and Monday’s falls look overdone, and slightly manipulated in all honesty, probably to get the early “well its December, it must rally” buyers. If 6520 breaks then it will drop even further I feel, probably to 6450. It won’t be long before we need to be brave and buy the dips again!