Good morning. Well March lived up to its billing as a very weak month, with the FTSE failing to stay above 7000 for very long. Worries over Greece, the Middle East bubbling up with the Saudi/Yemen situation, Iran, etc. Overnight has seen a low of 6670 on the FTSE, though its bounce back 50 since hitting that. I think this quarter is going to be volatile again, especially as we run in towards the election, and I notice in the Bloomberg article below they are expecting a correction to buy into on various equities. On thing I have noticed during March is that the support and resistance levels haven’t been playing out too well. There might have been a bit or a reaction but generally they have broken, both up and down. What has worked better is the moving average strategies on both the 10 and 30 minute chart – though that involved more seat of the pants trading. Will be interesting to see how April plays out. On the flip side to a tanking FTSE, the economy grew at its fastest pace for nine years in 2014 as GDP figures showed the economy expanded by a stronger than expected 2.8pc last year, according to the Office for National Statistics. Quarterly expansion came in at 0.6pc in the last three months of 2014, leading to overall yearly growth reaching the same levels as before the financial crisis in 2006.
US & Asia Overnight from Bloomberg
(Bloomberg) — Asian stocks fell after the regional equity gauge posted its steepest quarterly advance since 2013. Material and consumer shares led declines.
The MSCI Asia Pacific Index slid 0.3 percent to 145.85 as of 9:01 a.m. in Tokyo. The measure on Tuesday completed its best quarter since the period ended September 2013, rising 6.1 percent, as China boosted stimulus. Valuations on the gauge rose last week to the highest since May 2010.
“This is going to be a tougher quarter and you can expect higher volatility,” said Nader Naeimi, who helps manage about $118 billion as Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd. “We have raised cash levels and now have less in equities than in the past year. You need to have some powder dry to buy into the market if we have a correction.”
Japan’s Topix index slipped 0.3 percent. The quarterly Tankan index for large manufacturers held at 12 in March, the Bank of Japan said today, missing the median estimate of economists for a reading of 14. A positive number means optimists outnumber pessimists.
South Korea’s Kospi index lost 0.2 percent and Australia’s S&P/ASX 200 Index declined 0.1 percent. New Zealand’s NZX 50 Index was little changed.
Futures on the FTSE China A50 Index added 0.3 percent. International money managers have been selling mainland shares as valuations climb to the highest levels since 2010 and gauges of Chinese economic growth decline. The Shanghai Composite’s 84 percent advance during the past 12 months has outpaced every other major market worldwide.
China PMI
China’s official manufacturing purchasing managers index is due Wednesday, along with final March numbers for the HSBC Holdings Plc/Markit Economics measure. A preliminary reading on the private gauge indicated factory activity reverted back to contraction last month, after rising to 50.7 in February. Levels above 50 signal expansion.
E-mini futures on the Standard & Poor’s 500 Index lost 0.1 percent. The underlying gauge lost 0.9 percent yesterday, trimming a ninth quarterly advance in a market that has tripled since 2009. [Ref]
FTSE Outlook
Todays pivot is 6816, but unless the bulls step in soon then it still looks bearish. The 10 minute chart has a decent looking channel in play with upside resistance at 6745, and support down at 6640. I mentioned above about the moving averages and the 30min ones are still firmly bearish, as are the daily now. The 10 minute is showing some weak bull at the moment, and I wouldn’t totally a rule out a rise to test the 25ema on the daily at 6875ish sometime soon. We also have the top of the 10 day Raff there. I would expect the bulls to really be back in charge unless we broke that level – 6880. Support from the Bianca channels is currently showing at this 6722/6726 area where we are as I write this, though 6707 is also support slightly lower down. I wouldn’t be surprised if we get an initial rise, to build on that bounce from 6670 over night. It will be interesting to see if the bulls break that 6745 resistance as then we could be on for a rise to the daily pivot at 6816 (6810 on IG). The key will be if the 30minute EMAs cross to bull, but that will need any initial bounce to stick to enable that. I have gone for an initial rise based on the fact that the 10min SMAs are bullish as I am writing this and we are at the bottom of the Bianca channels (though of course we have already breached these overnight), with 6745 looking fairly key. Down from there I expect the bottom of that 10 minute channel, a move above I expect us to rise to the daily pivot. Being the start of the new month and quarter is traditionally strong (1st April is the 4th strongest market day). We are also testing the 200ema on the daily at 6733 – which held well the other day when 6700 was tested.