Good morning. Well the bulls failed to break back within the 10day daily channel yesterday, with the resistance at 7030 – it started off with the rise to attempt it, but then stalled, pottered about all day, then fell at the end, dragged down by US weakness (or maybe the news that one of the One Direction members was leaving!). I mentioned the 25ema on daily as support at some point soon, thats 6909 for today, a level that we might well head towards if the bears can break initial support at 6960. The Greek situation continues to rumble on in the background too, with the latest being that the Greek government will not receive €1.2bn (£883m) in European rescue funds after officials ruled the Leftist government had no legal claims on the cash. Athens requested the return of money it said was erroneously handed to creditors from Greece’s own bank recapitalisation fund, the Hellenic Financial Stability Facility (HFSF).
US & Asia Overnight from Bloomberg
(Bloomberg) — Asian stocks retreated from an almost eight-month high, following a slump in U.S. equities, as materials and consumer shares led losses.
The MSCI Asia Pacific Index slipped 0.6 percent to 148.20 as of 9:01 a.m. in Tokyo. The measure rose Wednesday to the highest close since July 30, while the Nasdaq Composite Index fell the most in 11 months and the Standard & Poor’s 500 Index sank 1.5 percent as a selloff in semiconductor shares spread to the broader market. The Asian gauge climbed 8.2 percent this year through yesterday, bringing valuations to 15 times estimated earnings, near the highest since 2010. Still, that compares with 17.4 times for the S&P 500.
“Wall Street is struggling to add to its recent record high and it looks like the upward momentum is starting to show signs of fatigue,” said Matthew Sherwood, head of investment markets research in Sydney at Perpetual Ltd., which manages about $21 billion. “Asia has an advantage over the U.S. as Asia has cheaper valuations. What’s weighing on Asia is the performance of the Chinese economy, which is facing some growth road blocks.”
The Shanghai Composite Index dropped 0.8 percent on Wednesday, ending a 10-day rally that was the longest such streak since 1992, amid concern the slowing economy is hurting earnings growth. A report on Tuesday showed a Chinese manufacturing gauge fell to an 11-month low in March, suggesting more stimulus may be needed to bolster factories in the world’s second-largest economy.
Japan’s Topix index sank 0.7 percent today, as did South Korea’s Kospi index. Australia’s S&P/ASX 200 Index dropped 1.2 percent. New Zealand’s NZX 50 Index slid 0.6 percent. Markets in China and Hong Kong have yet to open.
U.S. Slump
E-mini futures on the S&P 500 added 0.1 percent. The Nasdaq Composite slumped 2.4 percent Wednesday, the most since April 2014. The S&P 500 has now gone 26 days without posting gains in back-to-back sessions, the longest stretch since 1994, data compiled by Bloomberg show.
The European Central Bank approved an increase of more than 1 billion euros ($1.1 billion) in the emergency funds available to Greek lenders, two people familiar with the decision said Wednesday. Greece has until Monday to show how it will follow through on reform commitments after the euro area ruled out speedy access to aid funds, three officials said following a conference call of finance ministry deputies. [Ref]
FTSE Outlook
We are on a fairly key level as I write this, 6960 and if this holds then we could well get a push up to 7000 to test the bottom of the 10 day channel again. As per yesterday, the bulls need to break back into this channel to push higher, though the live charts pivot is also at 7003 (IG is 6989 after that after hours sell off) so might have a job on their hands. Below 6960, sees the next support at 6935, 6920, and the 25ema on the daily at 6909. There is a PRT line at 6893 so a stop just below this on a 6909 long would be prudent. However, if the bulls have a go early on, and they do seem to have more strength in the morning at the moment, before the US drags things down, then a rise to 7000, and possibly 7015. Above this has 7090 and an unlikely for today 7172 as the levels to watch. This initial support at 6960 is also coming from the 10ema on the daily, though the bulls will have to be quick out the block as everything looks pretty bearish (tight stops on a long from here!). I’m going to be optimistic and go for 6960 holding today for a push back to 7000, but if it breaks that support switch to short pretty quickly to target 6930 or lower.