Good morning. There was a danger of a recurrence of the previous days movements as the markets were strong in the morning and then started to weaken quickly after the open of Wall Street. Fortunately as the afternoon drew on Wall Street rallied strongly as a rebound in oil prices boosted energy companies. The market has made multiple attempts at rallies over the last few days which have repeatedly failed however maybe this is the genuine recovery we have been waiting for. An eye on oil shares is probably the best indicator as no recovery can continue while oil shares lag and in this case the recovery was lead by oil shares. A promising day on the markets which could see more rises into the weekend. Travel shares lagged as world events made travel and tourism more risky but we hope this is short lived.
Was a decent day yesterday shorting 5900 first thing, then the 5850 long both gaining profit. The rally rocketed to 6000 in fairly short order but has since fallen back overnight and we are back at 5915 with the shorter term chart looking bearish, but the bulls needing 5912 to hold.
US & Asia Overnight from Bloomberg
Asian stocks tracked U.S. gains, with the regional benchmark paring its second week of losses, as material shares led the advance.
The MSCI Asia Pacific Index rose 0.8 percent to 121.66 as of 9:01 a.m. in Tokyo after dropping 1.7 percent on Thursday. The gauge is heading for a 1.9 percent decline this week. The Standard & Poor’s 500 Index climbed Thursday, led by oil and other commodity shares, as crude rebounded above $31 a barrel and metals gained. Comments by Federal Reserve Bank of St. Louis chief James Bullard that the rout in energy prices may dent inflation expectations helped fuel the rally as technical signals suggested the selloff may have gone too far.
“While we’re seeing a little bit of a rebound, I’d be hesitant to say that we’re out of the woods,” Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington, which manages about $7.2 billion, said by phone. “There’s just a lot of uncertainty and risks. While oil could be close to a bottom, the news out of China continues to get worse and we’ve still got geopolitical risks. There are selective investment opportunities but there are just as many risks out there.”
Traders have been whipsawed in 2016, with equities around the world off to their worst start to a year on record as oil plummeted to levels last seen more than a decade ago and China struggled to maintain control over its markets. The MSCI Asia Pacific gauge has fallen 7.7 percent this year, while the Shanghai Composite Index is down 15 percent.
Regional Gauges
Japan’s Topix index jumped 1.8 percent after slumping 2.5 percent on Thursday. South Korea’s Kospi index added 0.9 percent. Australia’s S&P/ASX 200 Index rose 1.3 percent, as BHP Billiton Ltd. jumped 4.4 percent. New Zealand’s S&P/NZX 50 Index increased 0.9 percent.
Markets in China and Hong Kong have yet to start trading. Futures on the Hang Seng China Enterprises Index climbed 0.3 percent in most recent trading, while contracts on FTSE China A50 Index and the benchmark Hang Seng Index each slipped 0.1 percent.
The Shanghai Composite Index climbed 2 percent on Thursday, reversing a loss of as much as 2.8 percent and sending a gauge of volatility to the highest levels since September. Stocks rebounded as 28 companies listed on ChiNext small-caps index vowed to take action to stabilize the market and the China Securities Regulatory Commission assured investors that the forthcoming registration system for initial public offerings won’t lead to an oversupply of new shares.
E-mini futures on the S&P 500 index advanced 0.2 percent. The U.S. equity benchmark index climbed 1.7 percent on Thursday, while the Dow Jones Industrial Average rallied more than 220 points. The recovery accelerated earlier while Bullard answered questions from reporters following a speech in which the policy maker, who was a vocal proponent of raising interest rates, sounded a more cautious tone.
Material and industrial shares led gains on the Asia’s benchmark gauge on Friday, while energy stocks also climbed. Crude oil futures rose 2.4 percent in both New York and London on Thursday. Contracts on copper climbed the most this year, while iron ore also advanced. [Bloomberg]
FTSE Outlook and Prediction
The charts look a bit messy but I think we will pop higher soon and break through the 6000 level. The 10 and 30min charts are bearish at the moment (not surprising after the drop from 6000 last night), however the 2 hour chart is showing support at 5909 so if this level holds this morning then we could get a spring back up from here. We also have some major PRT support at 5893, and with 5900 being resistance initially yesterday (we dropped off this twice, and then broke through on the 3rd touch) this area could be support. However, the recent pattern has been for the bears to sell any rally strongly as we saw at 6000 again, so the bulls will really need to be quick out the blocks this morning as we are almost at that support area. Fair bit of news out at 13:30 from the US later including retail sales which is likely to move the market around that time. If the bears break through the 5893 support area then it will probably stay fairly bearish for 5836 again, and possibly 5733 on Monday to test the bottom of the Bianca channels. The bulls do need to break 6051 and I don’t think they will do that on any initial rise (this is the 25ema on the daily). So, usual weird Friday coming up most likely, stay nimble and I have just gone for the one autostrade as per the trade plan below, however, if the long gets stopped then flip to short for 5836 and 5740.