Good morning. Maybe it was a bit optimistic expecting the bulls to reach 6845 yesterday though they did try and climb from the pivot area at 6800 but only reached 6825 before the bears took control. The S&P did manage to pretty much reach the 1968 before dropping – all the way to 1949 where there is a bit of support. The FTSE hit the 6750 area late in the day but that level has held ok overnight. As you know I have this as support, though if that goes this morning the next level is 6730, possibly 6715. The latter should hold, though a lot depends on jitters over the Middle East.
Asia Overnight from Bloomberg
Asian stocks fell, led by material shares, as escalating violence in the Middle East sapped demand for riskier assets.
The MSCI Asia Pacific Index (MXAP)dropped 0.3 percent to 144.35 as of 12:32 p.m. in Tokyo, with eight of its 10 industry groups declining. The gauge has slid since reaching a six-year high on June 19. U.S. stocks closed lower after the Wall Street Journal reported that Syrian warplanes struck targets in western Iraq, killing at least 50 people.
“A surge in oil prices can weigh on the global economy and that’s why the Iraqi conflict gets attention,” said Osamu Koizumi, Tokyo-based executive officer at Meiji Yasuda Asset Management Co. “Investors want to sell into the market near a high level, but I don’t think a correction will be big because fundamentals are good.”
West Texas Intermediate crude oil futures are on course for a 3.9 percent jump this month and closed at a nine-month high on June 20.
Japan’s Topix (TPX) index fell 0.3 percent. Prime Minister Shinzo Abe said deflation has ended in Japan and will be thwarted by new government policies designed to encourage business expansion. His ruling party will seek to pass a law in the next session of parliament to legalize casinos as part of a plan to boost tourism before the Tokyo Olympics in 2020, the premier said in an interview yesterday.
Regional Indexes
South Korea’s Kospi index retreated 0.6 percent. Australia’s S&P/ASX 200 Index lost 0.7 percent, while New Zealand’s NZX 50 Index slipped 0.3 percent.
Hong Kong’s Hang Seng Index rose 0.1 percent. The Hang Seng China Enterprises Index of mainland stocks traded in the city dropped 0.4 percent and the Shanghai Composite Index lost 0.5 percent. Taiwan’s Taiex index fell 0.1 percent. Singapore’s Straits Times Index added 0.2 percent.
Futures on the Standard & Poor’s 500 Index fell 0.1 percent today. The measure declined 0.6 percent yesterday following the Wall Street Journal report on the Syrian air strike. Earlier, U.S. Secretary of State John Kerry was in Iraq seeking to prod the country’s leaders to unite against an al-Qaeda offshoot that has seized control over areas of the country, OPEC’s second-biggest oil producer.
U.S. Recovery
Data showed purchases of new homes in the U.S. rose in May by the most in 22 years, indicating the industry is rebounding from a winter-induced lull at the start of the year. The Conference Board’s index of U.S. consumer confidence increased to 85.2 in June from 82.2 a month earlier, the New York-based private research group said yesterday.
The U.S. government’s third revision to the gross domestic product reading, due today, is expected to show a contraction of 1.8 percent in the first quarter, according to a Bloomberg survey of economists. A reading last month had the economy shrinking 1 percent.
FTSE Outlook
Todays pivot is 6796, so if the 6750 levels holds initially this morning I am thing that we will get a rise to that area before declining again. There is a bit of worry over the Middle East which is effecting prices, though gold isn’t racing away since climbing to the 1320 level – usually a good bell-weather of what indices are going to do next. I am still thinking that this 6750 level will hold, as talked about yesterday, as we are at the bottom of the 10 day Raff channel, and while I am writing the 10 minute chart has just gone bullish based on my moving average settings.
Below 6750 we have the Bianca channels at 6730, and a worst case low of 6715 which should hold. On the upside, above the pivot 6809 is resistance and a break of that will work wonders for the bulls for a further push higher. A long today is the safer play for a bounce back after those declines, from the supports at 6750, 6730 and 6715.