Good morning. A rather boring day yesterday as expected with the US closed, seemed like London took the day off too! However, we did get the slow drift up to the 6840 area, unfortunately not quite reaching the 6810 order level (stopped just shy at 6812). I took the risky short at 6840, but with the stop at 6847 as it was either going to dip a little from there or carry on rising, hence the tight stop. It was a fairly strong resistance but the bulls managed to break it overnight and the stop got hit. The rise was helped with China paring rates and adding funds. We are now testing the 6862 resistance which has held so far overnight. All things considered we are still looking fairly bullish, and even the IMF are revising their guess again and upgrading the UK outlook from 1.9% to 2.4% for 2014, the second time they have revised upwards in 3 months.
Anyway, today should be a bit more lively, with some Euro/German sentiment data out at 10am as well. a lot of the FTSE bullishness of recent days has been underpinned by a resurgence in the mining sector, which looks to be climbing out of the doldrums.
Asia Overnight from Bloomberg
Asian stocks climbed, driven by gains in Chinese and Japanese shares, as China’s money-market rates fell the most in four weeks and the yen weakened against all major peers. Oil slid.
The People’s Bank of China yesterday added funds and expanded access to a lending facility as money-market rates surged amid rising demand for cash before the Lunar New Year and concern that some wealth-management products may default. The Bank of Japan starts a two-day policy meeting today. Johnson & Johnson and Verizon Communications Inc. report earnings today as U.S. markets reopen after a national holiday.
“The PBOC knows it can’t afford any systemic risks even if it wishes to conduct stress tests on the banks,” said Hu Yifan, chief economist at Haitong International Securities Group Ltd. in Hong Kong. “It’s obvious that the market is still vulnerable, so the PBOC has to provide cash to ease the shortfall, at least before the Lunar New Year.” China breaks for a week-long national holiday on Jan. 31.
A Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics probably dropped to 50.3 this month from 50.5 in December, according to a Bloomberg News survey before data on Jan. 23. Chinese factory output slowed last month, government figures showed yesterday.
FTSE Outlook
The FTSE is hitting resistance at 6862 as I write this, but we can’t deny that it still looks bullish. Tuesdays have previously been fairly bullish days, and with the IMF likely to revise the UK growth outlook upwards there is still a lot of ammo for the bulls to use. Today’s pivot is 6828, and we also have the bottom of a decent channel on the 30 minute chart at that area. As such, if there is an initial dip then I expect that area to act as support. 6810 has acted as support really well recently, but if that breaks then then 6793 (bottom of the 10 day Raff) and 6761 (bottom of the 20 day Bianca) are likely supports. Generally though I expect today to see a dip and rise, most likely off the pivot area as per the arrows below.