Good morning. Worked out well yesterday with the rise to the 6685 area then a drop and what a drop, initially it hilt target at 6626, bounced back to 6660 (giving the city boys who missed the initial drop a chance to hop on) before tanking even further to 6570! Certainly turning bearish as expected and should remain that way for the next couple of weeks I feel. The Nasdaq continues its correction as reality hits those overpriced tech shares…. and the rush of recent IPO’s here and in the US is often a precursor to a fall. Some of them have been quite ridiculous on both sides of the Atlantic – even online retailers here valued at many billions (ASOS etc I’m looking at you here) and JustEat to name a few. Still, bubbles are what makes the market and they have always been and always will be. From tulips to tech, property to commodities, nothing ever changes! Next one is bound to be something mundane like banks!
Yesterdays falls were some of the biggest in recent months – the S&P down 2% for the 3rd worst day in 9 months and the Nasdaq’s biggest falls for 2.5 years!
Asia Overnight from Bloomberg
Asian stocks slid, pushing the regional index down the most in three weeks, while emerging-market and commodity currencies weakened as a selloff in technology shares cut demand for riskier assets. Nickel extended its longest rally since 2010.
The MSCI Asia Pacific Index sank 1 percent by 1:58 p.m. in Tokyo, its biggest drop since March 20. Tencent Holdings Ltd., China’s biggest internet company, led declines, followed by Japan’s Softbank Corp. and South Korea’s Samsung Electronics Co. Standard & Poor’s 500 Index futures rose 0.1 percent. The yen held gains as currencies from Australia to Turkey weakened. Nickel climbed a 10th day as the prospect of further sanctions against Russia added to supply concerns.
Information technology and telecommunications stocks led today’s retreat after theNasdaq Composite Index slid the most since 2011 yesterday in the U.S. amid concern that valuations aren’t justified. China’s inflation rate was 2.4 percent in March, while producer prices fell 2.3 percent, close to the 2.2 percent decline predicted by economists surveyed by Bloomberg. India is expected to show faster growth in factory output for February while Germany and Italy issue price data before a U.S. consumer confidence report.
“As market sentiment worsens in the U.S., investors tend to focus on negatives, creating a downward spiral,” said Juichi Wako, a Tokyo-based equity strategist at Nomura Holdings Inc., the nation’s biggest brokerage. “We’re seeing a necessary correction in technology shares.”
China’s Economy
China’s producer-price index retreated following the previous month’s 2 percent drop, as the government seeks to shore up growth with spending on railways and tax relief for small businesses. Data yesterday showed exports from China fell 6.6 percent in March, with economists expecting a gain of 4.8 percent. Imports dropped 11.3 percent after rising 10.1 percent in February.
Germany also reports final inflation numbers for March today, while in the U.S., producer prices and the University of Michigan survey of consumer confidence in April are due.
USA
Claims for U.S. jobless benefits dropped to 300,000 last week, the least than at any time since before the last recession, data showed.
The Dow Jones Internet Composite Index sank 4.2 percent in the U.S. session and the Nasdaq Biotechnology Index plunged 5.6 percent, the most since 2011. Alexion Pharmaceuticals Inc. dropped 7.5 percent, the biggest slump in the S&P 500. The drugmaker, which trades at 101 times reported earnings, has lost 22 percent since closing at a record on Feb. 27.
Alcoa Inc. this week unofficially began the U.S. earnings season, recording quarterly profit that exceeded analysts’ estimates. Earnings for members of the S&P 500 probably climbed 1 percent in the first quarter, analysts now forecast, after anticipating a 6.6 percent increase in January.
Gold
Gold climbed 0.2 percent to $1,320.96 an ounce following a 0.6 percent advance yesterday. The precious metal is headed for a 1.3 percent gain this week, a second weekly climb. Palladium slid 0.4 percent and silver declined 0.1 percent.
FTSE Outlook
Well its all pretty bearish and if the bulls are to maintain any hope they will need to break todays pivot at 6650 which, to be honest going into the weekend is probably unlikely. But then again this is trading we are talking about so you never know! On the downside we are not far off the bottom of the 20 day Raff, though the 10 day being over a shorter time frame has support at 6520. We have the bottom of the 10 day Bianca channel at 6581 so that might provide some early splice for the bulls. Supports after that are 6570 and 6550.
I am going to be quite optimistic to start with an go for an initial bounce as the inevitable bargain hunters swoop in thinking its fallen too far too fast, and then a drop, maybe from 6645/6650 if it were to reach that high (still think that is a bit of a big ask though), but 6620 more likely.
There is a rising 30 minute trend line with support at 6570 so if there was an initial drop that could well be support so I would look to go long there but probably try a half stakes long at 6581 (Bianca channel) first, to target 6620, 6640. Then going into the weekend i think a dip again. I don’t think that 6650 pivot will be broken today so a short there would be worth a go as well.