Morning all. Well I thought yesterdays was going to be a washout in terms of the 2 trade plan ones as the short was sat waiting at 6570 and the FTSE hit 6560 before dropping. However late in the day we had a spike down and the 6507 long trade was hit and we saw a rise to 6550 before the end of the US session, I banked the long at 6540 in the end. Overnight we have dipped a little, testing the pivot area at 6531, which might hold if tested again today. Japan in the news though as a small 5.0 quake hit, and there is still simmering tension with China over the disputed islands. US news yesterday was that jobless claims fell, once again fuelling talk of September tapering of QE.
Asia Overnight from Bloomberg
Asia’s benchmark stock index is on course to snap its longest weekly winning streak since January after Nikon Corp. (7731) cut its profit forecast and as investors await Chinese industrial production data. The MSCI Asia Pacific Index slid 0.2 percent to 133.56 as of 12:48 p.m. in Tokyo, with four stocks falling for every three that rose. The gauge is headed for a 1.5 percent decline this week, ending six weeks of gains. That was the longest run of weekly gains since the first week of this year.
“Earnings expectations are high,” Evan Lucas, a Melbourne-based market strategist at IG Markets Ltd., a provider of trading services for equities, currencies and commodities, said by telephone. “Things had started to get to a top. We need to see if the Chinese government is in control and pulling the right levers for the economy.”
The MSCI Asia Pacific Index fell 7.3 percent through yesterday from a five-year high on May 20 amid concern a slowdown in Chinese growth will worsen and as the Federal Reserve weighed a reduction in U.S. stimulus. The gauge gained 3.4 percent this year through yesterday, compared with a 19 percent surge on the S&P 500.
Futures on the Standard & Poor’s 500 Index (SPX) were little changed. The equity measure climbed 0.4 percent yesterday, halting a three-day drop, as Chinese trade data topped estimates and jobless claims fell. Claims for U.S. unemployment benefits in the four weeks ended Aug. 3 declined to 335,500 on average, the least since November 2007, a report showed yesterday. They rose to 333,000 last week, in line with the median forecast of 50 economists surveyed by Bloomberg News, from 328,000 the prior week.
China’s annual inflation rate remained at 2.7 percent in July from June. Growth in industrial output may remain unchanged at 8.9 percent from a month earlier, according to a Bloomberg survey of economists.
The Chinese government has signaled that it will defend its 7.5 percent economic-growth target for the year after expansion slowed for a second quarter. China last month announced measures to support the economy, including ordering companies in 19 industries to curb overcapacity as well as tax cuts for small firms and aid to exporters. Data yesterday showed exports rose 5.1 percent in July, while imports advanced 10.9 percent.
With the rebound from the 6507 level yesterday things aren’t looking too shabby currently, however there are 2 key levels coming up, while prices hold above 6533, being 6558 and 6580. To get bullish again then the FTSE really needs to break 6630. We are back within the Bianca channels, however the 10 day channel is still pointing down, as are the RAFF channels. We are just trying to break out of a triangle as I write this, which looks like it might fuel the rise to 6580, assuming 6558 can be broken by the bulls. Usual caveat though as its Friday – expect the unexpected! If 6580 breaks then its quite likely we will test 6630, and if that breaks, bulls are back in the party! That said, I think shorts are the safer option just now as I can still see us dropping to 6400. If however the S&P gets bullish and breaks 1701, upside targets are 1706 and 1711. Support wise, 1676 could be a level to watch on that.