6725 on the cards today? Support at 6677 pivot

Good morning. You can tell its earnings season as its all a bit of nothing really, the FTSE had a little bounce at 6670 stalled, fell back, climbed again and all within a 30 point range for the day. All very boring! Even Gold only had an 8 point range. Think most are waiting for earnings season to finish before going back into the market. Generally though the vibe is still bullish.

Facebook and Apple both beat estimates and whilst there was a bit of chop around release time, it was all quite orderly. New home sales in the US missed estimates yesterday though – real mixed economic news at the moment, some good some bad. Is all of this the calm before the storm?

Asia Overnight from Bloomberg

Bianca Trends
Bianca Trends

Asian stocks fell after an unexpected drop in U.S. home sales signaled a housing recover in the world’s largest economy is running out of steam, while investors weighed better-than-estimated earnings from Apple Inc. and Facebook Inc.

The MSCI Asia Pacific Index lost 0.3 percent to 138.5 as of 1:08 p.m. in Tokyo, with nine of the 10 industry groups on the gauge falling. Futures on the Standard & Poor’s 500 Index gained 0.3 percent as investors assessed the outlook for corporate earnings. Of the 159 index members that have reported results this season, 54 percent have beaten analysts estimates for revenue, data compiled by Bloomberg show.

“Despite better-than-expected earnings from Wall Street, investors remain concerned about China’s slowdown and the sustainability of U.S. economic growth,” Vasu Menon, vice-president for wealth management at Oversea-Chinese Banking Corp. in Singapore, said by phone today. “For Asian markets to really see a big recovery, investors have to be convinced that the U.S. is on a solid recovery path.”

Chinese shares in Hong Kong and Shanghai headed for their second week of losses after a report yesterday showed a preliminary manufacturing gauge signaled persistent weakness in the world’s second-largest economy.

Relative Value
The MSCI Asia Pacific Index yesterday traded at 12.7 times estimated earnings yesterday compared with 16 for the Standard & Poor’s 500 Index, according to data compiled by Bloomberg.

The S&P 500 Index (SPX) slipped 0.2 percent yesterday, snapping a six-day rally, after disappointing earnings from AT&T Inc. and Amgen Inc. and an unexpected drop in home sales.

Commerce Department data showed that sales of new homes unexpectedly 14.5 percent plunged in March to the lowest level in eight months, reflecting a broad-based retreat that signals the industry is facing bigger challenges than just bad weather.

Apple reported after the market closed that second-quarter revenue and profit exceeded analysts’ estimates amid a surge in iPhone sales. The world’s most valuable company is set to increase its shareholder payout plan by $30 billion.

Facebook Jumps
Shares of Facebook, the world’s biggest online social network, added 3.7 percent after hours, after falling 2.7 percent during the U.S. trading day. The company said Chief Financial Officer David Ebersman will leave and reported better-than-estimated sales and profit for the first quarter.

“The markets are taking these earnings well if you look at after-hours trading for both Apple as well as Facebook. They’re higher than where they closed,” Erik Davidson, San Francisco-based deputy chief investment officer for Wells Fargo Private Bank, which oversees $170 billion, said by phone. “There have been questions with the economy stumbling along, but this could be a spark as we move further into earnings season.”

FTSE Outlook

FTSE Prediction
FTSE Prediction

Not an awful lot happened yesterday really and it was a bit of a slow one. We are still not far off the top of the daily channels and with the Bianca ones showing shorter term at 6705 and 6725 then shorts around this area feel preferable. Even the 50 day is only at 6721! Todays pivot is 6677 so that could act as support for the moment, with 6702 immediate resistance, being the level we spiked and dropped from on Facebook’s results yesterday. Again we have support at 6662 after the pivot, and 6644 after that.

For today it could be another slow one (hoping that next week is going to be better for day trading the FTSE!). For today I am thinking it will be another dip and rise day, we have some jobs news out of the US at 13:30 which will have an effect on prices, forecast is 310k for initial claims, and 2735k for continuing claims.

Just below todays pivot we do have a new 30 minute channel which I expect to hold (hence the slightly wider stop on the long below, to account for that channel) so if we do dip to 6677/6666 then that could be a good bounce area. I am certainly looking for shorts at around the top of the daily channels at the 6710/6730 areas though. If the bears take early control and break the 6662 level then 6644 is the next support.