Good morning. Yet another trending day yesterday so my short off the resistance level didn’t work out, and we saw an out of hours high at 6805. Bit of a shame it didn’t dip quite to that 6737 area for the long entry, instead the pivot held and it was off like a scolded cat! Drives you mad sometimes! Bullish headlines with the Dow closing at new all time highs plus a couple of other little flags I’ll mention below set the alarm bells ringing for a change in sentiment before too long. In the meantime news out of the US (apart from a poor GDP) was pretty positive yesterday with a general vibe that the economy is gaining momentum (at least all that QE buys you something eh!). Next news not he horizon os job related over the next 2 days so will be interesting to see if that maintains the bullishness. I have a feeling that it might not.
Asia Overnight from Bloomberg
Japanese stocks climbed and precious metals fell amid optimism the U.S. economy is gaining momentum and as investors weighed company earnings. Crude held below $100 barrel after a gauge of Chinese manufacturing expanded less than predicted and U.S. stockpiles rose to a record.
The Topix Index rose 1.3 percent by 12:30 p.m. in Tokyo, after a fourth straight monthly drop, with markets from China to South Korea closed for the May Day holiday. Standard & Poor’s 500 Index futures were little changed after the underlying gauge advanced a third day yesterday. Silver and gold extended declines into a fourth day. Oil in New York traded near a four-week low, while wheat rose an eighth session amid concern over U.S. crop yields.
The U.S. will release jobless claims and monthly payrolls data over the next two days, after theFederal Reserve said in Washington that it will continue with the current pace of stimulus cuts as the world’s largest economy recovers. China’s slowdown came back in focus today as an official measure of April factory output rising to 50.4, below the 50.5 level predicted in a Bloomberg survey of economists.
“The Japanese market is following the U.S., particularly the Fed comments that the economy is growing and will bounce back,” Stuart Beavis, head of institutional equity derivatives at Vantage Capital Markets in Hong Kong, said by e-mail. “Investors are nervous about China. They are still worried about the growth story.”
May Day
The manufacturing purchasing managers’ index for Asia’s largest economy rose from a level of 50.3 in March. Readings above 50 signal expansion. A similar gauge from HSBC Holdings Plc and Markit Economics Ltd. released last week was at 48.3, from 48 previously, indicating China’s economy continued to contract in April. A final reading on the index is due May 5.
Markets in Hong Kong, India, Indonesia, South Korea, Malaysia, Singapore and Thailand are closed for the May 1 holiday, with mainland China shut tomorrow as well as today. Exchanges from Brazil to Germany and France will also be closed today, while Japan, Australia and the U.S. are open.
‘Slow-Moving Ship’
China’s economy is “a slow-moving ship at the moment, but the sentiment is turning progressively negative,” Chris Weston, chief market strategist at IG Ltd. in Melbourne, said by phone. “We haven’t had positive news for quite some time.”
U.S. Economy
Claims for unemployment benefits in the U.S. probably fell to 320,000 in the week to April 26, from 329,000 in the previous period, according to economists polled by Bloomberg before today’s report. Nonfarm payrolls, reported tomorrow, climbed by 215,000 workers last month, after rising 192,000 in March, a Bloomberg survey showed.
The U.S. central bank announced the fourth straight $10 billion cut to monthly bond buying after its two-day meeting in Washington ended yesterday. The Fed said it would continue to pare back the program with the economy gaining in strength as consumers spend more. Fed Chair Janet Yellen is winding down record stimulus as the world’s largest economy shows signs of recovering from a first-quarter standstill.
U.S. Weather
Data yesterday indicated economic growth in the U.S. stalled in the first quarter as harsh winter weather cooled business investment, exports dropped and inventories climbed at a slower pace.Consumer spending on services rose by the most in 14 years.
“Growth in economic activity has picked up recently, after having slowed sharply,” the Federal Open Market Committee said in its statement. “Household spending appears to be rising more quickly.”
The S&P 500 added 0.3 percent in New York, closing at 1,883.95, within seven points of the record 1,890.90 reached April 2. The gauge advanced 0.6 percent in April after climbing 0.7 percent in March and has added 1.9 percent in 2014. The MSCI All-Country World Index of global equities gained 0.8 percent last month, as MSCI’s Asia-Pacific gauge retreated 0.5 percent amid concern that China’s economy is slowing.
FTSE Outlook
I have a rather unorthodox indicator that seems to work well for sentiment and it helps me flag market tops and bottom areas (not an exact level). Its been quite reliable in the past and its basically how many of my paying customers for the alerts cancel in quick succession, coupled with the charts that are showing we are near the top of the daily channels makes me think that the market may well start to turn down soon. This week those 2 things are telling me that we are at/near or approaching toppy levels. It sounds a bit odd I admit but will be interesting to see what happens around this 6800 area. Certainly dropped off a bit from the high last night anyway.
Support today is 6774 which is the daily pivot, so the bears will be keen to break that as it opens up some decent downside targets for them, being 6747 (bottom of 10 day Bianca) then possibly 6650! (100 points off in 2 sessions…. not impossible). As mentioned above there is jobs related news out of the US over the next 2 days so that will set the tone. If the bulls defend any test of that pivot area and prices start to rise then resistance is 6795 (in hours high yesterday), 6811 then 6836 (both Bianca channel tops). As its also the start of a new month that is usually bullish as new money gets invested hence why i am thinking we will get the initial rise this morning.