Yesterday turned into a bit of a tricky one especially with the afternoon chop around the 6800 area not presenting any decent opportunities for a decent runner. The FTSE was more bearish at the beginning than expected (only getting about 15 points from that initial dip) so then the long off the pivot was stopped out; at least with a tight stop damage was minimal, however various knife catches at 6800 yielded a few points though it did start to look like we would dip to the bottom support level at 6777. Alas not and then there was a very weird pump and dump at the close, probably trapping quite a few longs with its fast drop. Seemed a bit strange for such a small divi so maybe more to it.
Asia Overnight from Bloomberg
Asian stocks pared declines, with the benchmark index set for a first monthly gain since October, South Korea’s won strengthened and natural gas headed for its biggest three-day rout since 2007. The yuan traded near a seven-month low amid concern about financial stress in China.
The MSCI Asia Pacific Index slipped 0.1 percent by 2:34 p.m. in Tokyo, after falling as much as 0.4 percent, and has advanced 2.3 percent this month. The CSI 300 Index of shares in Shanghai and Shenzhen headed for its lowest close since December 2012 while the yuan was little changed after weakening the most since 2010 yesterday. Standard & Poor’s 500 Index (SPX) futures rose 0.3 percent. The won climbed 0.7 percent versus the dollar and the currency of Australia, which counts China as its biggest trading partner, fell 0.2 percent. Gold was steady after a four-day gain. Natural gas dropped 2.7 percent.
The yuan’s decline coincides with a crackdown on risky lending that’s seen some Chinese banks curb funding to property developers and related sectors such as steel and cement. A meeting of lawmakers to set economic policy and growth targets begins next week in Beijing. The U.K. reports preliminary fourth-quarter gross domestic product figures, while data on U.S. mortgages and home sales are due today before durable goods orders and jobless claims tomorrow.
“There is a little bit of unease around China and what’s happening with the currency,” said Peter Esho, a Sydney-based chief market analyst at Invast Securities Co. “The market is going to remain flat for the rest of the week. The macro data ramps up next week and I think that’s what traders will be eyeing. Europe will continue to improve, as will the U.S. Asia is still probably going to consolidate further and pick-up toward the end of the year.”
US Futures
The S&P 500 ended the New York session down 0.1 percent, after fluctuating near its record closing level for most of the day. Financial, industrial and technology companies led declines in seven of the 10 main industry groups with the Conference Board’s U.S. consumer confidence index dropping to 78.1 for February, trailing a median economist estimate of 80.
Data on mortgage applications and new home sales in January is scheduled for today, with Federal Reserve Chair Janet Yellen to testify for the U.S. Senate on monetary policy tomorrow. Yellen said this month that only a notable change to the U.S. outlook would prompt policy makers to slow the pace of cuts to its stimulatory bond buying program.
FTSE Outlook
As I write this the FTSE is right on the pivot at 6829, after a pretty strong overnight session in the end, though there was yet another test of the 6795 area. It therefore looks like there is some bearishness creeping in so we need to stay nimble. The Daily Raff channels have support at the 6820 (10 day) and 6793 (20 day) so may hold for the moment; we are also at the bottom of the 10 day Bianca channel near enough (its 6834), though with the 20 day at 6777 (funnily enough the support area flagged up yesterday) a long from there is probably worth a go.
I have put 4 trades below, each of one of the more major support or resistance levels, and therefore with fairly tight stops – if the entry level breaks then it will probably fall/rise to the next one.
If we do break through the pivot with some early bull then 6846 is the first resistance then 6861 and 6878. I have put in a drop from that 6846 level though with the EMA’s being positive and a 10 minute channel with resistance at 6855 it might just sneak a bit higher. I think an initial short from that area will be ok but initially it looks a long.
Support wise, there is a whole load from the daily channels at around the 6790/6800 area though obviously we had quite a few tests of that level yesterday – the more its tested the more likely it is to eventually break. Should 6790 break, then 6777 (bianca 20 day is the nearest level to watch, then 6753, and 6715.