Good morning. Another frustrating day for longs as it appeared the strong rally into Christmas was starting. Unfortunately later in the session the FT100 nose dived along with the DOW to close 17 points lower, having been as much as 60 points higher earlier in the day. Some commentators said it was related to the Spanish elections or the weak oil price but it was quite aggressive when it happened. Commodities and supermarkets featured most in the biggest gainers, whilst oils were in the losers column. Overnight the FT100 has risen from its 6020 low, so not he positive side at least the bulls managed to hold above 6000. Was a bit early with the shorts yesterday going in at 6095 to start with which was a bit unfortunate. As mentioned yesterday, this week will see low volume and increased volatility.
US & Asia Overnight from Bloomberg
- S&P 500 stages late rally in New York to end day 0.8% higher
- China calls for `flexible’ monetary policy to support reforms
Asian stocks were little changed in thin trading as investors weighed the prospect of more stimulus from Chinese leaders.
The MSCI Asia Pacific Index added less than 0.1 percent to 130.05 as of 9:12 a.m. in Tokyo. Australia’s S&P/ASX 200 Index climbed 0.5 percent with volumes about 40 percent below the 30-day intraday average. The Standard & Poor’s 500 Index rebounded on Monday from its biggest two-day loss in three months.
China’s government said monetary policy must be more “flexible” and fiscal policy more “forceful” to combat slowing growth in the world’s second-largest economy. The rout in crude prices this year has pushed oil to the lowest levels since before the financial crisis, threatening to keep inflation from meeting central bank targets in Europe and America.
“Equity valuations are still compelling,” said George Boubouras, Melbourne-based chief investment officer at Contango Asset Management. “We expect lighter volumes going into Christmas this week. Relative valuations are still there,” favoring equities, he said.
Asian shares are down 5.6 percent this year, on course for their first back-to-back annual declines since 2002, as a commodity rout deepened and Chinese growth waned. The loss is about three times that of the S&P 500, which has dropped 1.8 percent in 2015. The Asian gauge trades at 13.7 times estimated earnings, compared with 17.1 for the S&P 500 and 15.5 for the Stoxx Europe 600 Index.
Japan’s Topix index gained 0.3 percent as the yen traded little changed against the dollar for a second day. The nation’s markets are closed Wednesday for a holiday.
Regional Gauges
South Korea’s Kospi index lost 0.1 percent. New Zealand’s S&P/NZX 50 Index gained 0.5 percent. Futures on Hong Kong’s Hang Seng Index advanced 0.4 percent in most recent trading, while contracts on the Hang Seng China Enterprises Index of mainland shares traded in the city climbed 0.3 percent.
Futures on the S&P 500 rose 0.2 percent. U.S. stocks surged in the final minutes of trading Monday, rebounding after the biggest two-day rout in three months as financial and technology companies led gains from equities’ lowest levels since October. [Bloomberg]
FTSE Outlook and Prediction
Despite that dip yesterday from the 6115 yesterday I am still thinking buy the dips is a better play this week. There is initial support today at the daily pivot at 6062, with 6038 below that where we have the bottom of the 30min channel. The bulls really need to break through 6100 and hold above that to get the 2 hour chart to turn bullish (still bear at the moment) for a bigger rise this week. The 10min and 30min charts are looking more bullish this morning than they were last night in terms of the moving averages, so we may well see an initial rise first thing, probably to test that declining 30min PRT line at 6104. If the bears appear there then we will most likely drop down to the pivot, whilst a break higher will likely reach 6135. There are a few daily resistance levels here at 6135 so a break of this will be worth going long on for upside towards 6250. Initially its probably worth a tentative short at 6135 though in case those daily resistance levels hold and we get a repeat of yesterday. I am thinking longs off the pivot and 6038 look the best plays though.