FTSE Trade alerts | Support 6991, 6974, 6950, 6846 Resistance 7029, 7040, 7080, 7120, 7204

Good morning. I hope you had a good weekend. The big news of course was China cutting the reserve requirement by 1% which has halted the bulls from their Friday sell off and seen a bit of a bounce in the futures. Fridays fall coincided with several things, but I think the main was that I was doing a seminar and thats the second time the market has been spooked and dropped all day during a seminar! In all seriousness, Friday was a particularly weird day and to summarize the stories in brief I need to use bullet points today:

• Bloomberg was down for a number of hours causing institutions to almost ‘trade blind’,
• there were comments that traders started selling on a Greek article released the previous day,
• a plane was returned to Istanbul because of a bomb alert,
• news came from China that they were softening regulations so find managers could loan stock to support short selling,
• a number of options expired boosting volatility,
• worries surround Greece running out of money
• U.S. corporate earnings were tepid.

US & Asia Overnight from Bloomberg

Industrial metals rallied with commodity-producers’ currencies, while Chinese money-market rates fell to a two-year low after the central bank cut the amount of reserves banks need by the most since the global financial crisis. Oil climbed with U.S. index futures.

Copper and zinc futures rose at least 0.7 percent by 1:27 p.m. in Tokyo, as the currencies of Australia, New Zealand and Canada strengthened at least 0.3 percent versus the dollar. Chinese interest-rate swaps slid to the lowest level since 2012, while the Shanghai Composite Index fluctuated after advancing more than 6 percent last week. Standard & Poor’s 500 Index futures gained 0.4 percent. Oil rose for the seventh time in eight days.

China’s 100 basis point cut to the main reserve ratio, the most since 2008, came amid the slowest expansion in six years and as data Saturday showed new-home prices falling from a year earlier in all 70 cities monitored. The country’s stock regulator on Friday tightened rules for margin-trade financing and made it easier to bet on declines. Solid U.S. inflation data also fueled global stock losses on Friday.

“The bull market is unlikely to end abruptly amid monetary easing, and will spill over to Hong Kong,” Hao Hong, the chief China strategist at Bocom International Holdings Co. in Hong Kong, wrote in a note Monday. “A market consolidation is nigh, and it will be extremely volatile. We should all know now by heart that the government is unequivocally supportive of a bull market, and is underwriting the rally.”

$193 Billion
The reserve ratio cut, and additional easing for some rural institutions, could free up as much as 1.2 trillion yuan ($193 billion) in total, according to Goldman Sachs Group Inc. analysts. The China Securities Regulatory Commission expanded the number companies available for short selling and banned brokerages from using so-called umbrella trusts in their margin lending businesses.

The Securities Association of China announced Friday mutual-fund managers can lend stocks for short selling. Offshore Chinese equity-index futures fell as much as 6.3 percent in the wake of the announcements, before almost erasing those declines after the reserve ratio cut.

The Hang Seng Index slipped 0.3 percent Monday and the Hang Seng China Enterprises Index, which closed at its highest level since January 2008 on Thursday, fluctuated. The Shanghai Composite Index swung between a drop of 1.1 percent and a gain of 1.5 percent.

The cost of one-year interest-rate swaps, the fixed payment to receive China’s floating seven-day repurchase rate, declined 20 basis points, or 0.2 percentage point, to 2.78 percent, according to data compiled by Bloomberg. That’s the lowest level since August 2012.

Copper Rallies
The Bloomberg Commodities Index advanced 0.4 percent as China’s stimulus was seen boosting demand in the world’s biggest consumer of industrial metals. Lead and zinc both climbed to the highest this year on the London Metal Exchange, while copper extended gains to a three-week high.

Copper for delivery in three months on the LME rose 1 percent to $6,117.50 a metric ton, while lead and zinc traded at $2,048.50 a ton and $2,228 a ton respectively.

The LMEX Index of the six main base metals on the exchange slipped to a five-year low on March 18 on concern that slowing economic growth in China will weaken demand amid ample supplies.

West Texas Intermediate crude climbed 1.4 percent to $56.52 a barrel in New York, close to the highest settlement for this year. Brent, the benchmark contract for more than half of global oil, added 1.2 percent to $64.19 a barrel in London, near the $64.95 level struck on April 16 that was the highest since Dec. 11.

Rigs targeting oil in the U.S. decreased for a 19th week through April 17, according to Baker Hughes Inc. Oil has surged 30 percent from a six-year low in March on signs sliding rig counts are reducing production amid a global supply glut. The price advance may still falter with U.S. crude inventories having swelled to the highest level in 85 years. [Ref]

FTSE Outlook

The Chinese reserve requirement cut has helped out the algo buy bots and we have pulled back above the 7000 and made it stick. There was a bit of a bounce last thing Friday from the 6974 area, so that is the line in the sand for the moment. I was trying to be a bit too eat with catching that falling knife I think as I was waiting for a test of 6964 where we have the 25ema on the daily chart, obviously it stopped just short of that level. I am glad I brought the stop to breakeven on Fridays longs, though it was a bit annoying for that 7087 short to get stopped out on the option expiry spike up to 7105, especially as it then dropped 100! For today we are just at the IG pivot area with the overnight rise, at 7029. As such I expect we will see an initial dip, and we have support at 7023 (25ema on the 30min) and 7006 which is more likely as we are likely to have a choppy start to the week. If that 7006 area holds, then the bulls will need to break through 7040, to enable a push to 7080 area where we have a rising PRT line. Above that and the resistance levels are 7120 and 7200 for the top of the Bianca 10 day. Support wise, below 7006, we have Fridays low at 6974, the 25ema on the daily at 6976 and then 6955 below that area.

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