Good morning, worked out well yesterday though sods law prevailed and it just missed the long order level at 6715. Maybe just a little too exact there. Anyway, the short from 6755 worked out well and sure enough we got the rise and then a bit more at the end with the divi hunters to just stick the head over the 6800 parapet. It topped out just before the close at 6806, which was the Bianca 20 day channel top, that level has changed today to 6856 (10 day is 6849) so if it gets bullish again, 6850 looks a good shorting area.
I mentioned yesterday that the weekly chart had resistance at 6793 so now we are around this area we could well start to see some bearishness. The media are getting a bit frothy again with how amazing the UK is doing, and with inflation falling to 1.9% yesterday things do appear to be picking up. House prices still look like they are overheating though! Just hope people can still afford the mortgages they are taking out when rates return to 3 or 4 or 5%. Credit bubble 2 anyone?!
Asia Overnight from Bloomberg
Oil and natural gas gained before data forecast to show U.S. stockpiles fell on heating demand, while silver led losses in precious metals. Chinese shares rallied to a two-month high, Japanese stocks slid and Thailand’s baht weakened.
West Texas Intermediate crude added 0.4 percent by 3:01 p.m. in Tokyo and natural gas climbed 1.7 percent. Silver sank 1.1 percent following a 13-day rally. The MSCI Asia Pacific Index was little changed, the Shanghai Composite Index advanced 0.9 percent while Japan’s Topix slipped 0.5 percent. Futures on the Standard & Poor’s 500 Index (SPX) and FTSE 100 Index were down 0.1 percent. The baht dropped 0.3 percent after clashes between anti-government protesters and police in Bangkok escalated.
Minutes of the Federal Reserve’s January meeting and data on U.S. housing starts and U.K. employment are due today, before a preliminary report tomorrow on China’s manufacturing. Violence in Thailand killed five people, while a crackdown on protesters in Ukraine left at least 18 people dead.
Chinese Manufacturing
The Shanghai Composite Index rebounded from yesterday’s 0.8 percent slide after overnight money-market rates dropped to a nine-month low, signaling ample cash supply even after the central bank drained funds. The Hang Seng China Enterprises Index in Hong Kong erased a decline of as much as 0.9 percent.
A flash estimate of China manufacturing was unchanged at 49.5 in February, HSBC and Markit Economics will say tomorrow according to economists in a Bloomberg survey. A final reading in January fell below 50 for the first time in six months, indicating contraction.
S&P Futures
S&P futures signaled the gauge may retreat after gaining 0.1 percent yesterday. U.S. housing starts probably fell 4.9 percent in January following December’s 9.8 percent drop, according to economists surveyed by Bloomberg.
In the U.K., the unemployment rate held at 7.1 percent in December from the previous month, matching the lowest since March 2009, the median estimate of economists polled by Bloomberg shows before data today. The Bank of England will release minutes of its Feb. 5-6 meeting when policy makers kept the interest rate at a record-low 0.5 percent.
FTSE Outlook
There is more and more positive press coming through to suck in the buyers to wrap up the tax year and pump into the ISA’s, so I expect that we will soon start to see a dip again. We have had a decent bounce off 6400 after the bearish January, so this rally might start to run out of steam soon. should it reach 6850 I think that will be a good short area to hold for the rest of the week, though as you can see with the arrows and resistance levels mentioned below, it needs to break 6808 before that. If it all goes pear shaped and the daily pivot at 6771 breaks then its likely to reach 6752, though I think that the pivot will hold initially. The bottom of the 10 day Bianca channel is 6727 – a level that is worth a long if seen. Before that a small short at 6808 with a widish stop could be a good play today, with 6820 as a level to back it up as an adding area – i.e. fade in the shorts.