Good morning. Nice hold of the 6902 level for a slightly slow run to 6955 late in the day, and it stalled around there as expected. The bears were not quite as vicious from that level as I expected, dipping to 6930 before a slight bounce. The bears weren’t helped by Yellen saying that interest rate rises were unlikely till at least mid 2015. The trends are of course still up, with support for today at 6920 initially.
US & Asia Overnight from Bloomberg
(Bloomberg) — Asian stocks gained, with the regional benchmark extending a five-month high, after Federal Reserve Chair Janet Yellen indicated an increase in interest rates is unlikely before mid-year.
The MSCI Asia Pacific Index climbed 0.3 percent to 145.82 as of 9:01 a.m. in Tokyo after closing at its highest since Sept. 12 on Tuesday. The Standard & Poor’s 500 Index advanced to a fresh record after Yellen told the Senate Banking Committee that wage growth remain too low even as the job market improves, and signaled that a change in the Fed’s guidance on interest rates won’t lock it into a timetable for tightening.
“Equities are slightly fully priced but aren’t unduly expensive,” Angus Gluskie, managing director at White Funds Management in Sydney, where he oversees about $550 million, said by phone. Yellen’s statement “doesn’t alter anything from our perspective as investors. We’re not yet in a fully synchronized global recovery but broadly most economies are developing in a right way. There are black spots. Chinese economic activity has been a concern.”
Japan’s Topix index added 0.3 percent. South Korea’s Kospi index advanced 0.7 percent. Australia’s S&P/ASX 200 Index slid 0.2 percent. New Zealand’s NZX 50 Index jumped 1.4 percent as it headed for a record close.
Markets in Hong Kong and China have yet to open, with mainland markets resuming trading following the Lunar New Year holidays. A preliminary gauge of China’s manufacturing due today from HSBC Holdings Plc and Markit Economics is expected to signal a third month of contraction.
Energy shares were the only group to decline on the MSCI Asia Pacific Index after West Texas Intermediate oil posted the longest losing streak since August. U.S. crude stockpiles are expected to have swelled by 4 million barrels last week from a record, according to a Bloomberg survey ahead of the official government report Wednesday.
U.S. Futures
Futures on the S&P 500 were little changed. The U.S. equity benchmark climbed 0.3 percent yesterday to a fresh record high. The Nasdaq Composite Index added 0.1 percent, climbing for a 10th straight day to bring it within 1.6 percent of its 2000 record.
Yellen repeated that the Fed’s pledge to be “patient” on beginning to raise the benchmark interest rate means an increase is unlikely for “at least the next couple” of meetings.
Euro-area finance ministers agreed to extend a bailout program for Greece after the government said it would undertake measures including a revamp of tax collection. International Monetary Fund Managing Director Christine Lagarde said Greece’s policy proposals fall short on key changes and may not meet the lender’s benchmarks for aid to continue.[Ref]
FTSE Outlook
6935 is the daily pivot for today so initial support is at this area, and is in fact the after hours low so far, Below this then the bottom of the 10 day Bianca at 6920 looks to be worth a long. Below 6905 sees the bottom of the 20 day Bianca at 6864 being tested, and a sign that maybe the current rise is running out of steam. Above 6960 (most recent high) sees the top of the Bianca’s 6973/77. A break out from here would likely reach 7000ish, either stalling at 6992, or overshooting to 7020 where we have the top of both the Raff channels. Worth a short here….
I shorted the 6954 area yesterday but it really hasn’t done too much, though I expect a test of 6920 today. From here I think we will get a bounce back up as the 10 day Bianca has been holding quite well this week. If it does break (as indeed it might, being the 3rd test of that support), then 6905 is support, with 6874 bottom of 10 day Raff and then 6864 below that, followed by 6849 where we have the 25ema on daily that still hast been tested and should hold as support if we are going to push higher. I’m just going to go for the 2 trades in the trade plan below and see how it pans out.