Good morning. Well, it wasn’t looking too bad initially for the bulls, then the Americans logged on and the selloff started. I was too early with my early longs at the pivot unfortunately, as the dumb money came into the market first thing and is what drove it up. We hadn’t had that for a while so not sure why they decided to do some buying yesterday morning, it looked initially like it was going to dip. Anyway, it still looks pretty bearish (as mentioned yesterday short the rallies, at present its better to be short than long as there are more points on offer) and does seem to be following that weekly chart I have been sending round (with the drop to 6000/6200 area); with the S&P dipping past 1750 and the Dow shedding over 300 points yesterday, there isn’t an awful lot to be excited about. Still, it made Janet Yellen’s first day memorable – probably the markets opening salvo for getting her to increase QE. I do think they have been a bit hasty is tapering that though.
Asia Overnight from Bloomberg
Asian stocks tumbled, extending a global selloff, with Japanese and Hong Kong shares dragging the regional index toward its lowest close in five months. The Australian dollar surged as the country’s central bank held rates, while emerging-market currencies rose.
The MSCI Asia Pacific Index lost 2.6 percent by 3:17 p.m. in Tokyo, the most since June. Japan’s Topix index plunged 4.8 percent, entering a correction, and the Hang Seng Index slid 2.6 percent in Hong Kong. Standard & Poor’s 500 Index (SPX) futures rose 0.1 percent after the gauge sank the most since June in New York. The so-called Aussie climbed 1.3 percent while currencies in Malaysia, Thailand and Indonesia gained at least 0.2 percent. Zinc fell 0.3 percent, declining for a 10th day and heading for the longest run of losses since January 1989.
U.S. factory-orders data today will add to evidence of a slowdown in manufacturing in the world’s two largest economies, according to economists surveyed by Bloomberg. About $2.9 trillion has been wiped from global equities this year as slower Chinese growth, cuts to U.S. stimulus and unrest in emerging markets from Thailand to Ukraine spook investors. UBS AG (UBSN) reported profit that was twice analyst estimates, Toyota Motor Corp. raised its full-year profit forecast by 14 percent and BP Plc reports earnings today.
“Investors should steer clear of risk assets over the short term as the turmoil does not look like it will be over anytime soon,” Mitul Kotecha, head of global markets research for Asia at Credit Agricole CIB wrote in an e-mailed note today. “A combination of tapering, a confluence of country-specific emerging-market country concerns and weaker growth in China provide the backdrop for a volatile few weeks.”
Factory Data
Measures of volatility surged across the region, with the Nikkei Stock Average Volatility Index and similar gauges in Hong Kong and Seoul at levels unseen since July. The Chicago Board Options Exchange Volatility Index, or VIX, for U.S. equities jumped 16 percent to 21.44 yesterday, the priciest since December 2012.
American factory output expanded in January at the weakest pace in eight months as orders slumped, with the Institute for Supply Management’s factory index dropping to 51.3 in January from 56.5 the prior month. Readings above 50 indicate expansion. The median forecast of 85 economists surveyed by Bloomberg called for a decline to 56. New orders slipped the most in five months in December, Census Bureau figures today will show.
FTSE Outlook
I got it wrong yesterday expecting the dip first so apologies for that. Today I think we will see a bit of a bounce initially., though after such a big down day a bit of consolidation. That said, it is pretty volatile at the moment so the usual rules are possibly out the window! The top of the 10 day Bianca channel held yesterday in the end and was tested twice around the 6533 area. Today’s channel top is 6500 and the bottom is 6350, a level that should get hit if the bears come out again. 6380 is showing as support for the 20 day Bianca channel.
Today’s pivot is 6488 so likely to be resistance if seen, an area that tallies with the 200ema on the 30 minute chart. On the 30 minute chart we have a few ProTrend lines in play and I have plotted what I think will happen.