Good morning. The bulls completely and utterly failed yesterday and though we had the usual pattern of a bearish Monday as per last year, (will it be a bullish Tuesday today?) the FTSE looks pretty sick. Unless the bulls really go for it and soon, it looks to be on a pretty steep downward path with 6200 on the cards soon, maybe even 5500?! Its a shame yesterday morning rise didn’t quite reach the 6585 and 6610 shorting areas as once to stalled at the 6570 are it spent the rest of the day falling – all markets rattled by falling oil, Greece and poor German inflation figures. Of some hope for the FTSE today is that the 10 and 20 day Raffs both show support at 6338!
Asia Overnight from Bloomberg
Asian stocks fell the most in seven weeks, extending a global selloff after crude oil plunged to the lowest level since 2009. The yen rose and a measure of government bond yields slid to a record as investors sought haven assets.
The MSCI Asia Pacific Index sank 1.8 percent by 3 p.m. in Tokyo. Standard & Poor’s 500 Index futures were little changed after the gauge had its lowest close since Dec. 17. The yen gained a second day and Japan’s 10-year bond yield fell to a record. Oil in New Yorkwas at $50.22 a barrel after tumbling 5 percent yesterday. A measure of bond risk in Asia climbed the most in three weeks after a newspaper reported that a Malaysian state investment company failed to repay a loan on time.
Oil’s rout has turned energy companies into the biggest losers of a global retreat that wiped out $1 trillion of equity value already this year. The prospect of Greece exiting the euro area is also looming over markets, while data on the region’s consumer prices tomorrow is likely to stoke speculation over whether Europe will embark on full-scale government bond buying. China is accelerating infrastructure projects as economic growth threatens to slip below 7 percent.
“2015 is barely three trading days old and already the two biggest themes that were predicted to affect the markets this year are making headlines: oversupply of commodities and the euro zone,” Evan Lucas, a markets strategist in Melbourne at IG Ltd., wrote in an e-mail to clients. “The fundamentals of oil are unlikely to change in the first half of this year, which will see oil bedding down into its bear market for months to come.”
Stocks, Oil
The effective yield of bonds in the Bank of America Merrill Lynch Global Broad Market Sovereign Plus Index fell to 1.28 percent on Monday, the lowest level on record for a gauge that was started in 1996. MSCI’s All-Country World Index declined for a fifth trading day, losing 0.3 percent after a 1.9 percent slump last session, its steepest one-day retreat since June 2013.
Benchmark stock indexes fell across Asia, led by a 2.9 percent retreat in Japan’s Topix index. Hong Kong’s Hang Seng Index lost 1.4 percent and South Korea’s Kospi gauge dropped 1.7 percent, its biggest decline in a year. Australia’s S&P/ASX 200 Index slid 1.6 percent as BHP Billiton Ltd. (BHP), the nation’s largest oil and gas producer, slumped 4.7 percent.
West Texas Intermediate crude rose 0.4 percent today after sinking as much as 5.5 percent last session to $49.77 a barrel, the first time it has breached $50 since 2009.
Inventories in the U.S., the world’s biggest oil consumer, probably rose by 750,000 barrels last week, according to a Bloomberg survey of analysts ahead of government data. The highest U.S. crude output in 30 years is fueling the global glut that drove oil into a bear market last year. OPEC’s refusal to cut production is also contributing to declines.
China Boost
Gold for immediate delivery advanced as much as 0.3 percent to $1,208.29 an ounce, climbing for a third day in its longest winning streak since October. The yen strengthened 0.6 percent as the Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, dropped 0.3 percent.
Australia’s dollar advanced 0.7 percent after data showed the country’s trade deficit was A$925 million ($750 million) in November, narrower than economists projected. The Aussie extended gains and the yuanclimbed 0.16 percent after China was said to have brought forward work this year on infrastructure projects valued at 7 trillion yuan ($1.1 trillion). [From here]
FTSE Outlook
Well the immediate future could be ok, but longer term it all looks pretty bleak unless the FSTE can rise above 6610…. a bit of a big ask right at the moment! I have resistance at the daily pivot at 6466 initially, and a good place to “short the rally”, with 6528 (25ema on daily) then 6552 as resistance above that which is the top of the 10 day Raff. With such a strong downtrend running to start this year I can’t see the bulls breaking much above that but if there do then 6610 to 6619 is a resistance area next. Support wise for today, initially last night low 6384 is support and then the PRT 30 minute channel at 6372. If that breaks then a drop down to 6290 looks quite possible. Bear in mind that the pattern last year was bear Monday then a (usually weak) bull Tuesday. Below 6290 then 6195 and 6090 beckon. Theres quite a lot of bearishness in the mainstream media etc, some even touting 3600 level. Shorting the rallies for the moment is a good plan, though I think we may find some support at 6338 where the 2 Raffs are.