Good morning. Those 2 longs worked out quite well yesterday despite it being a bearish day overall. The Fed minutes came out at 7pm and alluded to no rush to raise the rates unless the were more confident inflation was moving towards their goal. China worries persist with another bearish day there, with global growth concerns still weighing heavily on the markets. There was a quick sell off just before the bell on the FTSE yesterday, sometimes indicative of a last rush for the exit before the bulls reenter. Having now hit the 6400 area it will be interesting to see what plays out today and if this area holds at all (6400/6367)
US & Asia Overnight from Bloomberg
Asian stocks fell for a fifth day after Federal Reserve minutes showed U.S. officials sought more progress on inflation and investors watched China as concerns heighted over the nation’s slowdown.
The MSCI Asia-Pacific Index slid 0.1 percent to 135.87 as of 9:05 a.m. While the Fed’s minutes quelled speculation the central bank will raise rates at its next gathering, China’s shock currency devaluation continued to roil emerging-market assets, with concern China’s slowdown will limit global growth fueling a rout in commodities. Gold and silver gained on haven demand while oil and copper extended losses.
“While the Fed is looking less likely to move in September, everybody is really worried that China is slowing down faster than what official figures are telling you,” Evan Lucas, a strategist at IG Ltd. in Melbourne, said by phone. “That’s putting pressure on industrial metals and emerging markets.”
Japan’s Topix index slid 0.5 percent. South Korea’s Kospi index fell 0.4 percent. Australia’s S&P/ASX 200 Index dropped 0.6 percent. New Zealand’s NZX 50 Index was little changed. Markets in China and Hong Kong have yet to open.
Chinese stocks fell this week after the securities regulator said late Friday the state agency tasked with supporting share prices will reduce buying as volatility falls. China’s richest traders are cashing out of stocks, while a record drop in yuan positions at the central bank and financial institutions last month signaled investors are moving money out of the country.
Signs of Support
The Shanghai Composite Index gained 1.2 percent on Wednesday, erasing losses of as much as 5.1 percent, with signs of state support appearing as the gauge rallied 6.6 percent intraday after falling to as low as 3,558.38.
Futures on the Standard & Poor’s 500 Index added 0.1 percent. The underlying measure fell 0.8 percent on Wednesday.
Concerns about global growth are increasing as the Fed considers the timing of its first interest-rate increase since 2006. Odds on a September hike were further reduced Wednesday after Fed officials said while conditions for an increase were approaching, they needed more confidence inflation was shifting toward their goal.
The Fed meeting occurred before China’s devaluation on Aug. 11, a move that had already prompted some investors to scale back bets on a September increase. Those odds were reduced after the Fed minutes, with traders pricing in a 36 percent probability of an increase next month, down from more than 50 percent earlier in August. [Ref]
FTSE Outlook
I have plotted the arrows off that 30min channel and the daily support from the 3 Bianca channels for a bounce today. Certainly feels a bit of a left field prediction when all you can see is bearishness (which is usually the best time to do the opposite!). If the 6375 support area does break though then I think there is all likely hood we reach the bottom of the Raffs again, at 6330 and 6310 for today. So short a break if todays long plan doesn’t work out. If the 6375 area does hold then a rise towards the daily pivot at 6437, and possibly the top of the 30min channel at the 6490 area, where we also have the 200ema might occur. Seems wildly optimistic but that 30min channel worked well yesterday and there is good daily support around here. I think the Chinese will step in with some more stimulus before too long.