Good morning. Well once again all the FTSE action seemed to be a bit all over the place. When i was doing yesterdays analysis I could see the rise to 7100, but after that it wasn’t so clear. I should have “guessed” that it was going to sell off as we saw a 70 point fall. I did think though that with that strong rise first thing we would get the 7120 for the better short entry. Oh well. The bulls fought back anyway and regained the 7070 area overnight. We have had a pretty decent Asia session overnight, and the S&P has climbed off yesterdays pivot at 2096 (only a little bit though!) so I wouldn’t be surprised if we have a decent up day today. Unfortunately I think the FTSE is a little jittery at the moment, and probably will be till the election, though Europe as a whole is on tenterhooks as the Greek saga lurches from one headline to another. It was Greece that triggered the dip from 7100, with the ECB rumouring a reduction of support of the Greek banking sector. Then comments from EU’s Dijesselbloem were of a very accommodative and bullish tone indicating that developments in the negotiations gave cause for optimism. Wouldn’t be surprised if the news and comments are just “playing” the market.
US & Asia Overnight from Bloomberg
Asian stocks headed for a seven-year high, led by financial and technology shares. Oil dropped, while Australia’s dollar climbed after data showed faster-than-estimated inflation.
The MSCI Asia Pacific Index rose 0.6 percent by 12:26 p.m. in Tokyo, with Japan’s Topix index trading at the highest since Nov. 1, 2007. Standard & Poor’s 500 Index futures added 0.1 percent. U.S. oil fell 0.9 percent, dropping for a second day before stockpiles data. The Aussie jumped 0.8 percent versus the greenback, recovering after nearing parity with New Zealand’s currency.
Global equities are less than 0.3 percent below a record value of more than $71 trillion as companies report earnings, central banks from Europe and Asia expand stimulus and the prospect of June U.S. rate increases recedes. China’s bull market for equities is just beginning, according to a commentary published on the People’s Daily’s website. The biggest U.S. oil stockpile in 85 years probably swelled by 3.2 million barrels last week.
“The momentum in equities is still there,” Evan Lucas, a markets strategist at IG Ltd. in Melbourne, said by phone. “They’re getting through the earnings season in the U.S. unscathed. More and more the expectation is the Fed won’t do anything soon.”
The Asia-Pacific stock gauge is heading for its highest closing level since January 2008. The Nikkei 225 Stock Average rose beyond 20,000 points, poised for its highest close since April 2000. SoftBank Corp. climbed 1.7 percent after Yahoo! Inc. hired advisers to explore selling its stake in Yahoo Japan Corp., in which billionaire Masayoshi Son’s mobile carrier is the biggest shareholder.
HKMA Intervention
The broader Topix index gained a second day. The Kospi index in Seoul advanced 0.6 percent for its eighth climb in nine days.
Hong Kong’s Hang Seng Index rose 0.7 percent and a gauge of Chinese companies listed in the city added 1 percent. Shares of the city’s bourse operator advanced to near a record amid speculation the world-beating rally in Chinese stocks will continue to draw global investors.
The Hong Kong Monetary Authority sold HK$19.34 billion ($2.49 billion) this week to protect the city’s peg to the U.S. dollar amid inflows.
The Shanghai Composite climbed 1.6 percent. Baoding Tianwei Group Co., a transformer maker that’s a unit of the Chinese government-owned China South Industries Group Corp., became the country’s first state-owned company to default on an onshore bond.
BHP Slips
The firm said it will fail to pay 85.5 million yuan ($13.8 million) of bond interest due Tuesday. Kaisa Group Holdings Ltd. became the first Chinese developer to default on U.S. currency debt Monday.
The S&P/ASX 200 Index fell 0.9 percent in Sydney after BHP Billiton Ltd. said it will curb the pace of iron ore expansion in Australia amid slumping prices. Shares of the world’s biggest mining company slipped 1.8 percent. The NZX 50 Index lost 0.5 percent.
The Aussie dollar rose to 77.63 U.S. cents after trimmed mean consumer prices rose 2.3 percent from a year earlier versus economists’ forecasts for a 2.2 percent gain. The consumer price index rose 0.2 percent in the quarter, exceeding projections for a 0.1 percent increase. It fell to as low as NZ$1.0039 Tuesday, its weakest intraday level since April 6.
The euro dropped 0.1 percent to $1.0726 amid mounting concern over Greece. Yields on 10-year Greek bonds rose 35 basis points, or 0.35 percentage point, to 13.64 percent Tuesday, a level last seen in December 2012.
Greek Jitters
European Central Bank staff have produced a proposal to increase the haircuts banks take on the collateral they post when borrowing from the Bank of Greece, people with knowledge of the discussions said.
Dutch Finance Minister Jeroen Dijsselbloem told RTL Television some progress had been made in debt talks with Greece and a deal may still be reached by the end of the month. The Bank of England publishes meeting minutes Wednesday.
More than 140 companies on the S&P 500 report results this week, including McDonald’s Corp. and Boeing Co. While analysts are predicting a slump through September, they have moderated how steep that drop in earnings will be. With data due this week on U.S. housing and jobs, investors are also seeking clues to the economic recovery after previous reports pointed to weaker growth and the dollar strengthened.
West Texas Intermediate crude declined to $56.10 a barrel after slipping 2.2 percent on Tuesday. Brent crude fell 0.6 percent to $61.69 per barrel.
Oil has rallied about 30 percent from a six-year low in March on signs the idling of U.S. drilling rigs is spurring a production slowdown that may ease the global supply glut. The recovery may still falter amid the swelling in the country’s stockpiles. The Energy Information Administration’s report is due Wednesday. [Ref]
FTSE Outlook for Trading
The 2 levels that I am looking to start things off with today are support at 7040 and resistance at 7110. I have gone for an initial dip before the rise as we are sat just below the daily pivot of 7068 as I am writing this and the 10 min chart is actually slightly bearish, hence a little dip. If 7040 holds then I expect we will rise back to 7100. Yesterday I was thinking that if the S&P pivot at 2096 held we will get an up day today, and the bulls managed to close above that level so it will be interesting to see if that plays out. Will take the FTSE up a bit of so. Below 7040 the next support is 7005, then the bottom of the 10 day Bianca at 6986, and with the 25ema on the daily at 6990 this area is good for a long, possibly even a swing long to hold for a few days. The bottom of the 20 day Raff is 6970 so would only need a 30 point stop or so for that swing. Resistance as mentioned is 7105 (yesterday’s high), with 7110 (top of the 10 day Raff) and then 7125 and 7150 above that. The top of the 10 day Bianca is 7160, so a short around this area could prove fruitfu, though the bulls might have a job on their hands at the 7110 area.
We have a pretty decent rising 30 minute channel in play as you can see on the chart below, though the moving averages are not particularly strong at the moment.