Good morning. That dip got slightly overdone yesterday dropping off the 10 day Bianca at 6835 in the end. It bounced back to the 6818 I SMS’d at about 8:50pm, and has since dropped back again. Its certainly choppy and messy! Dax had a mare yesterday morning first thing – dropping 100 in about 10 minutes. Headlines still in the papers about mortgages and attempts to cool the housing bubble. I expect we are going to see 6700 before we see 6900 in the next few sessions, but the main levels I’m watching today at 6750 and 6845.
Asia Overnight from Bloomberg
Asia’s benchmark stock index swung between gains and losses as utilities advanced and regional energy explorers fell after Iraqi army victories damped concern the nation’s oil supplies will be disrupted.
The MSCI Asia Pacific Index (MXAP) gained 0.2 percent to 144.97 as of 12:45 p.m. in Tokyo, after falling as much as 0.3 percent. The gauge fell the past two trading days after reaching a six-year high on June 19.
“It was about time the market got a correction,” said Masaru Hamasaki, a senior strategist at Tokyo-based Sumitomo Mitsui Asset Management Co., which oversees about 13.4 trillion yen ($132 billion). “If the conflict stays within Iraq, I don’t think that will push up oil prices a lot.”
Brent for August settlement dropped as much as 50 cents to $113.62 a barrel on the London-based ICE Futures Europe exchange and was at $113.88 at 1:20 p.m. Sydney time.
Regional Gauges
South Korea’s Kospi index added 1 percent. Australia’s S&P/ASX 200 Index fell 0.4 percent, while New Zealand’s NZX 50 Index lost 0.2 percent. Taiwan’s Taiex index gained 0.3 percent.Singapore’s Straits Times Index added 0.1 percent.
Japan’s Topix index fluctuated. Hong Kong’s Hang Seng Index rose 0.3 percent after slumping the most in three months yesterday. The Hang Seng China Enterprises Index gained 0.4 percent, while the Shanghai Composite Index added 0.4 percent. India’s S&P BSE Sensex rose 0.3 percent.
Futures on the Standard & Poor’s 500 Index lost 0.2 percent today. The U.S. equity gauge slid less than 0.1 percent yesterday as General Electric Co. led industrial shares lower, to offset gains among energy producers.
Data yesterday showed U.S. sales of existing homes climbed 4.9 percent to a 4.89 million annualized rate last month, the most since October. A separate report from Markit Economics showed a measure of U.S. manufacturing growth rose to 57.5 in June from 56.4 in May.
China Outlook
“We are going to have a neutral move today because the U.S. market was effectively flat,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has $131 billion under management. “Things in China are starting to look brighter, underlining support for share markets.”
A preliminary China manufacturing Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics rose to 50.8 for June yesterday, exceeding the 49.7 median estimate of analysts surveyed by Bloomberg News. A number above 50 indicates expansion.
FTSE Outlook
Todays pivot is 6805 so we may get some initial support there first thing as we are testing that as I write this. Yesterdays low was 6785 and any movement below that is likely to reach 6753 where we have the bottom of the 10 day Raff channel. As such a long at 6755 could do well for a bounce.
On the flip side, if the 6800/6805 level holds (at least initially anyway) then the bulls will need to break that 6818 level i mentioned on the SMS. If so then a rise to the top of the Bianca 10 and 20 day at 6845 looks likely, especially if the bulls break 6835. Higher resistance is 6890 where we have the top of the 10 day Raff. We are also at the bottom of the rising 30 minute channel lending support at 6800ish.
So, 2 key levels to look for today – 6750 and 6845. Initially I think a climb off the pivot to set up a decent short later on.