Good morning. I hope you had a good weekend. Well the Bulls managed to break that 6275 resistance on Friday morning but the 6335 pivot held fast and decline it did as a wave of fear swept thorough markets during the day. Fear and greed, always has and always will be the two main forces that move markets! Today that has continued and its been along time since there has been a sea of red across the indices first thing. Going to be some forced selling today and margin calls I think! Once again its China as stocks plunged the most since 2007 as government support measures failed to allay investor concerns that a slowdown in the world’s second-largest economy is deepening.
US & Asia Overnight from Bloomberg
Asian stocks extended declines as a global rout deepened, dragging a measure of regional equities down 20 percent from its April peak. A close at this level would mark the start of a bear market.
The MSCI Asia Pacific Index retreated 4.4 percent to 125.75 as of 12:35 p.m. in Tokyo as stock gauges from Sydney to Hong Kong tumbled. Global equities have lost more than $5 trillion in value since China’s shock currency devaluation on Aug. 11, with U.S. shares succumbing to the selloff at the end of last week.
“Things are probably going to get worse before they get better,” Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which oversees about $118 billion, said by phone. “You really need rate cuts and more policy easing in China. In the meantime, things can get worse. We’ve got to see more clarity around the Fed” and its timeline for raising interest rates.
Hong Kong’s Hang Seng Index, which entered a bear market last week, fell 4.6 percent. Japan’s Topix index dropped 4.7 percent, heading for a correction. Singapore’s Straits Times Index slid 3.2 percent, set for a three-year low. The Shanghai Composite Index tumbled 8.5 percent, while Australia’s S&P/ASX 200 Index retreated 3.5 percent. New Zealand’s NZX 50 Index lost 2.4 percent.
Calm in the U.S. stock market was shattered last week, with volatility soaring by the most on record as the Dow Jones Industrial Average entered a correction and investors dumped the biggest winners of 2015. E-mini futures on the Standard & Poor’s 500 Index fell 2.7 percent Monday.
Taiwan on Sunday slapped a ban on short-selling of borrowed stocks at prices lower than the previous day’s close, while South Korea’s finance ministry said it will act “pre-emptively” after the nation’s largest exchange-traded fund suffered the biggest weekly withdrawal since its inception 15 years ago. The Taiex index slumped 4.9 percent on Monday, while the Kospi index fell 3.5 percent in Seoul. [Ref]
FTSE Outlook
Tricky one to write today thats for sure. Its been a long time since we have had such a sea of red first thing in the morning, and with the China falls shaking off the stimulus, the Yuan rate cut the other day has really let the genie out of the bottle and its going to be tricky to get it back in (and all sorts of other analogies about horses, barn doors and bolting). Once the charts do start to show any sort of bounce then the slightly more positive news flow will start. There is bound to be a bit more forced selling today so those brave bulls around might start to slowly build up positions or add to last weeks longs to target 6300 this week. When its like this there is no clue as to where the bottom is. That said the bottom for the 10 day Raff was 5940 for today and that level has been tested and has held so far today, and obviously the markets are pretty oversold right now (RSI10 is reading 9.8). Mostly this is being driven by fear so most technicals are irrelevant, however that level and 5835 below that are supports on the charts. Rate cut in September anyone? I can see an initial rise to 6075ish pre market, and maybe then some more bear, a bit of a repeat of Friday really with the rise and dip. If 5940 holds then a further rise towards 6100 when the US come online is possible, though maintain a bearish vibe for the moment, though interestingly Gold has slipped off its highs today, and if it was all 100% bad then that would still be rising.