Good morning. To sum up yesterday, so close but yet so far. I had top resistance at 6573 and the high was 6571.9, I had bottom support at 6503 and the low was 6504.1. Therefore the order levels I quoted were a bit too exact but I gather from various emails that a few of you shorted at 70 and longed at 05 so all well done for that! The new chat room is bedding in OK – yes its a bit different but at least this one allows me to share my charts. Im still shopping around anyway and there is a new one that launches in a few weeks that looks promising with more functionality, so I may well switch again soon.
Current news flow is still pretty bearish – slowdown in US manufacturing and Russia worries still. As per usual give it a week or 2 and the sentiment would have changed and most news will be good. Despite the bearish overtones, indices are holding up fairly well though 6570 is the line in the sand that the bulls will need to break (and the 20 day Raff is 6585) so might be hard pressed to push on for the moment. 6615 would be possible if they were to break (6615 is the 25ema on daily).
Asia Overnight from Bloomberg
Asian stocks swung between gains and losses, after the biggest rally in a month for the regional benchmark index yesterday, as data showed a slowdown in U.S. manufacturing and investors weighed the prospect of a recession in Russia.
The MSCI Asia Pacific Index was little changed at 134.29 as of 12:14 p.m. in Tokyo after rising 1.2 percent yesterday, the steepest gain since Feb. 21. Six of the 10 industry groups on the gauge fell. Banks warned Russia’s economy is at risk of shrinking as the world’s leading industrial powers threaten further sanctions to deter it from invading other parts of Ukraine after the annexation of Crimea.
The U.S. factory data “is a little bit weaker, but nothing changed much,” said Donald Williams, Sydney-based chief investment officer who helps manage manages about $1.6 billion at Platypus Asset Management Ltd. in Sydney. “It’s a grinding recovery and some of the data are better than expected and some are worse.”
US Futures
Futures on the Standard & Poor’s 500 Index rose 0.1 percent today after the measure declined 0.5 percent yesterday.
Manufacturing
A Markit Economics Ltd. preliminary index of U.S. manufacturing fell to 55.5 in March from 57.1 a month earlier, the London-based group said yesterday. Economists had expected a reading of 56.5. A level above 50 indicates expansion and this month’s reading was the second-highest since January 2013.
China’s manufacturing industry weakened a fifth straight month, a preliminary China Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics showed yesterday. Signs of faltering factory output in the world’s two biggest economies come as U.S. policy makers rein in stimulus and as Chinese lawmakers pledge to maintain growth while curbing shadow banking and credit expansion.
Economic Sanctions
Sanctions imposed by the U.S. and the European Union are pushing Russia toward a recession as the intensity of their economic penalties increases after the annexation of Crimea earlier this month.
Banks including state-run VTB Capital say the world’s ninth-biggest economy will shrink for at least two quarters as penalties for annexing Crimea rattle markets, curb investment and raise the cost of borrowing. Sanctions that have so far focused on individuals with visa bans and asset freezes may be expanded to target specific areas of the economy.
G-7
The Group of Seven major powers decided to hold a summit in Brussels in June instead of a planned G-8 meeting in Sochi in the latest sanction against Russia. U.S. President Barack Obama and his fellow G-7 leaders met in The Hague to agree on the next steps in the crisis, amid growing concern that Russia is building up its forces on the border with Ukraine.
“Military skirmishes, even though major powers are involved in this particular case, they tend to be relatively short-lived events,” Williams at Platypus Asset Management said. “Even if it escalates and markets correct more significantly, that will just be a buying opportunity.”
FTSE Outlook
6570 is the current line in the sand based on yesterdays high and the bulls will need to break that, but with the 20 day Raff sitting at a channel top of 6585 they might be hard pressed. While there is still fairly negative news flow investors will be keeping their powder dry, however, having had a decent bounce off the 6504 area yesterday, the bulls are holding their own. That said, with the trade plan below, i have put some shorts on around 6570 and 6585 which I expect to yield a decent drop. I haven’t plotted the blue arrows after that area as i think its fairly key. If its breaks then 6600 and 6630 are likely, if it holds then we will be back down to 6500 pretty quickly. 50/50 at that resistance area and favouring the drop myself. I am still, for the moment, looking at the “short the rallies” play.