Good morning. Well that was a bit of a sell off yesterday, with the US erasing all the 2015 gains! Pretty much every support got busted, with the only one holding so far being the 200ema on that daily chart at 6699. With the bottom of the 10 day Bianca reset to 6715 for today will we see a bit of a bounce? The daily RSI is also on 30, so around oversold conditions (not an indicator that I use in itself). If we bounce today then I wouldn’t be surprised if if we climb all the way to 6850. Its all boiling down to the uncertainty over rates with everything now expecting rate rises sooner rather than later. If the US raises there then the UK is sure to follow quite soon behind. Though I doubt they will before the election now. Personally I think we are still far from a safe economy that can stand on its own 2 feet, and not just the UK but certainly the Eurozone. It would be a shame if US rate rises stalled the early stage of the recovery there and plunged the world back into recession, especially as China is still on the ropes having just cut their interest rates again.
US & Asia Overnight from Bloomberg
(Bloomberg) — Asian stocks fell, following a slump in U.S. equities, after the dollar gained amid speculation the Federal Reserve is moving closer to raising interest rates.
The MSCI Asia Pacific Index retreated 0.4 percent to 142.17 as of 9:02 a.m. in Tokyo, with materials companies leading declines as all 10 industry groups fell. The Standard & Poor’s 500 Index slipped 1.7 percent on Tuesday, the biggest drop in two months, as the dollar surged to near a 12-year high versus the euro. China releases data from retail sales to factory output today.
“Rates are moving soon,” said Evan Lucas, Melbourne-based market strategist at IG Ltd., a provider of trading services in equities, currencies and commodities. “The jobs report on Friday has awoken the currency markets to this fact and the equity market is now feeling the early effects of what to come.”
Federal Reserve Bank of Dallas President Richard Fisher said the central bank should begin to raise rates as the labor market improves. While policy makers from Sydney to Frankfurt are moving toward looser monetary policy, the Fed stands out in accepting a higher exchange rate as a sign of economic strength.
Friday’s jobs report showed U.S. employers added 295,000 workers last month, beating the median prediction in a Bloomberg survey of economists, while the jobless rate fell to the lowest in almost seven years, to within the range the Fed considers full employment.
Regional Markets
Japan’s Topix index dropped 0.5 percent, heading for a third straight day of losses since the U.S. employment report. South Korea’s Kospi index retreated 0.7 percent. New Zealand’s NZX 50 Index declined 0.5 percent.
Australia’s S&P/ASX 200 Index fell 1.1 percent. Reserve Bank of Australia Assistant Governor Christopher Kent said the nation’s currency is still “relatively high” given the economy’s state even after the recent lowering of the exchange rate. He spoke in Hobart on Wednesday.
The economic data from China come a day after producer prices fell 4.8 percent in February, extending a record run of declines to 36 months. While consumer prices beat estimates with a 1.4 percent rise, it may be too early to conclude deflation risks have abated because last month’s Lunar New Year holiday festivities boosted costs. The central bank cut interest rates for the second time in three months from March 1, after earlier reducing banks’ reserve requirements.
China’s “fixed-asset investment, industrial production and retail sales are all expected to slide,” said IG’s Lucas. “If the U.S. markets finally exit the six-year bull market and China does indeed slow faster than expected, Asian markets are in for a rude shock.” [Ref]
FTSE Outlook
I have a feeling that we may see a bounce today. The bottom of the 10 day Bianca is at 6715 and we have held well since testing 6699 (the 200ema on the daily chart). The 30 minuet chart EMAs haven’t yet crossed over to bullish but they are quite close and the bottom of the 20 day Raff for today is at 6690. Not sure we will dip that low, but I am going for a rise this morning. The S&P is at the bottom of its Raff channels, whilst the Dax is actually still pretty bouyant (probably helped by all that QE money pouring in currently) at 11550 and shrugged off its drop to 11400 yesterday. The 2 main supports I have at 6715 and 6690, with 6670 below that and a point where it is likely to bounce – I haven’t put that in the trade plan but might be worth a go if it were to drop that low. On the upside, todays pivot is 6761 so initial resistance there, 6800 the top of that 30min channel next. If this breaks then a trip all the way to 6858 (25ema on daily) and 6950 isn’t beyond the realms of possibility and will just go to show what an over reactionary, rubbish drop this has been! However, the daily EMAs have crossed over to a bearish scenario, so the bulls might have a hard job breaking through the 25ema on the first couple of attempts (good shorting spot if it touches the 25ema, 6858 today).