Good morning. Well that was entertaining yesterday – we climbed, reached the pivot and dropped as per the first 2 arrows, then the bulls just completely failed, 6810 broke and the US dragged the FTSE down with it. But not as much as it could have, considering the Dow was -230 at one point. I was wrong to be optimistic for yesterday though there is still a glimmer of hope, as the bottom of the daily channels (on FTSE) have held quite well. we are looking at around the 6770/80 area today with the Bianca ones. If the bulls can get above 6810 then then there is still some optimism, if not then we are in for the drops towards 6200. I see Mark Carney has scrapped forward guidance – no surprise there really as if they commit to a long term plan then they can’t change their minds!
If we do start to get bearish with the bulls failing to capture and hold 6810 today then once again it shows how the media can give the opposing view – they have been pretty bullish since the start of the year, however the chances for a push that much higher than where we started were slim. As you know with the 2014 outlook I did back in mid December, I only really had the 6850/6950 area as a possible target for the start of this year. It will be interesting to see the media slant over the next few weeks. As Warren Buffett says, be greedy when others are fearful and fearful when others are greedy!
Asia Overnight from Bloomberg
Asian stocks fell, with declines in Japanese and Hong Kong equities putting the regional index on track for its longest run of weekly losses in more than 18 months. Australia’s currency fell to a 3-1/2 year low as Asian credit risk headed for the highest in three months.
Global stocks have retreated this week as mixed company earnings and signs of weakness in China’s economy added to concern that cuts to U.S. Federal Reserve stimulus will destabilize emerging markets. China’s banking regulator was said to have ordered increased scrutiny of credit risks in the coal-mining industry, while money-market rates fell after the central bank injected funds for the first time this year. The Fed meets next week, while State Street Corp. and Procter & Gamble Co. report earnings today.
“A correction could occur,” Shane Oliver, the Sydney-based head of investment strategy at AMP Capital Investors Ltd., which oversees $131 billion, said by e-mail. “We have to expect more volatility. Shares are no longer dirt cheap, meaning the easy gains are behind us and we are now more dependent on rising earnings coming through.”
More than three stocks fell for each that rose on the Asia-Pacific gauge, which hasn’t declined for four straight weeks since June 2012. The measure is down 1.7 percent since Jan. 17. The Topix (TPX) capped its longest streak of weekly declines since June, as exporters retreated after the yen gained the most in four months against the greenback yesterday.
The China Banking Regulatory Commission told regional offices to closely monitor credit risks from trust and wealth management products as well as among coal miners, said two people with knowledge of the matter. The CBRC order didn’t mention concerns that a 3 billion yuan trust product distributed by Industrial & Commercial Bank of China Ltd. may default after the coal miner that borrowed the funds collapsed, said the people, who asked not to be identified as the matter isn’t public.
“Weak data in China are strengthening demand for safety assets like the dollar while U.S. tapering expectations offer a continued boost for the greenback,” said Hong Seok Chan, a currency analyst at Daishin Economy Research in Seoul. Data this week on China’s gross domestic product, industrial production and manufacturing activity have pointed to a slowdown in the world’s second-largest economy.
FTSE Outlook
We might be on for a small bounce today but I feel that the tide is turning for some bearishness now. If the bulls can get the price above 6780 today then 6810 become the major resistance (as it was support for so long) but I think it might try to reach 6818. Above that 6858 and 6885 are potential high spots. The Dow looks pretty ropey though for more downside to 16000 and possibly even 15660, which would obviously bring the FTSE down with it. That said, the FTSE is on its daily channel bottoms from the Bianca chart, and not far off the bottom of the Raffs at 6750/6760 for both the 10 and 20 day. hence why I think we might get a little bounce. If however the bulls we able to get above and hold 6810 then I think that chance the game a little and might actually put them back in charge – thus making yesterday a flushing exercise to kill some longs. Overnight its held up pretty well, if it was really going to tank it would have done so with a big Asian sell off.
I still have a slight nagging feeling that the bulls aren’t just going to give up, and feel there is still a chance of 6900, however it feels a little bit more unlikely currently.