Good morning. Friday was a bit bearish wasn’t it! Fears over the global economy set markets tumbling and the FTSE carved through all its supports, hitting a low at 6535. As I write its bounced back a bit to near the 6600 level so maybe all is not quite lost for the bulls at the moment. Having reached the 6850, it did look like we were going to reach the ultimate target of 6950ish before the big drop, alas the bulls fell at the final hurdle. I am mindful of what I said back in December about the dip from 6850 /6950 towards the 6000/6200 area for March, as per the weekly chart I have below. Anymore days like Friday and we will see that level this week! The markets started getting spooked by the weakening state of China based on the data that came through last week, and data today show slowing manufacturing.
Apple is projected to report 5 percent sales growth and a 2 percent profit increase today for its fiscal first quarter, typically the period when Apple generates its biggest chunk of revenue. There are a few big tech companies reporting this week – I expect that they might be good as tech does seem to be the area where consumers are still happy to spend.
Asia Overnight from Bloomberg
Asian stocks declined, with the region’s benchmark index heading for its steepest loss since June, as concern that the global economic recovery is faltering spurred investors to sell riskier assets.
The MSCI Asia Pacific Index dropped 2.1 percent to 134.79 as of 3:07 p.m. in Tokyo, extending four straight weekly declines and headed for its lowest close since Sept. 6. Japan’s Topix index sank 2.8 percent as the yen touched a seven-week high versus the greenback. Global stocks tumbled the most since June on Jan. 24 as a sell-off in emerging-market currencies prompted investors to seek havens.
“Optimism among global stock investors is waning,” said Tetsuo Seshimo, a Tokyo-based portfolio manager at Saison Asset Management Co., which oversees about $791 million. “Markets are losing momentum after rising a lot toward the end of last year.”
The Asia-Pacific equity gauge is set for its biggest monthly decline since May after a private gauge of China’s manufacturing dropped to a six-month low in January, adding to signs growth in the world’s second-largest economy is slowing. Shares on the measure traded at 13 times estimated earnings Jan. 24, compared with a multiple of 15 for the Standard & Poor’s 500 Index and 14 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
Futures on the S&P 500 added 0.2 percent today. The equity gauge tumbled 2.1 percent Jan. 24 and has declined 3.1 percent this year.
FTSE Outlook
While I have been writing this email the FTSE has sneakily rises about 15 points and is now above 6600. With the daily EMAs having crossed now the initial target for any rise is the 10ema area at 6709, though that’s a big rise to put in today after a very bearish day. but never say never! With today’s pivot at 6701 and things now in a downtrend, I am holding a short bias and therefore 6701 area looks like a good place to go short. We are below the 10 and 20 day Bianca channels and with a breakout like that it will take a few days for them to recalibrate and prices to get back within those levels. However, the longer term 50 day channel bottom of 6572 – a level that I imagine it will be testing soon (don’t forget the weekly scenario). With the channel breakouts the supports can become resistances so 6671 and 6711 might present the bulls some trouble today if it gets that high. Ultimate high today is 6738 – if the bulls exceed that then we might turn bullish for the rest of the week.
On the IG charts there are a cluster of pivots around the 6650 area – daily, weekly and monthly – so I expect initial resistance for this early morning bounce around there. However, the EMAs are turning up and there are a few weak bullish signs, so a rise to 6700 is still possible, though I think a short off that pivot level will work alright.