Good morning. Both the longs saw little bounces yesterday but as expected the overriding trend was down, shame it never managed to trigger the short at 6840ish though, or even one at 6820. Anyway, the long at 6791 first thing got a few points, whilst the 6770 came very late in the day but it was a weak evening session. Today sees support lower at 6756 where we have the bottom of both the Bianca channels, with support at 6700 below that. Bulls will need to break the daily pivot at 6793 today to target 6800 and 6830 (top of 10 day Bianca). Slightly better than expected Chinese manufacturing data last night might help.
Asia Overnight from Bloomberg
Asian stocks rose from a four-month low and copper climbed with Australia’s dollar as a preliminary gauge of Chinese manufacturing unexpectedly rose. The price of insuring Asian bonds against default increased with precious metals.
The MSCI Asia Pacific excluding Japan Index climbed 0.2 percent by 12:50 p.m. in Hong Kong, reversing a drop of as much as 0.3 percent. Copper climbed 0.7 percent after a gauge of commodities closed at the lowest since July 2009 yesterday. Australian bonds rallied while the local dollar strengthened 0.5 percent from a seven-month low. A gauge of Asian credit-default swap prices climbed two basis points. Standard & Poor’s 500 Index futures were little changed after the U.S. gauge slid 0.8 percent. Palladium added 0.6 percent.
The so-called flash purchasing managers index rose to 50.5 from a reading of 50.2 in August, HSBC Holdings Plc and Markit Economics said, while economists predicted it would fall to 50, the border between expansion and contraction. About $574 billion was wiped from the value ofglobal equities yesterday after China’s Finance Minister Lou Jiwei damped speculation leaders in Asia’s biggest economy will implement large-scale stimulus. Factory indexes for the U.S. and Europe are also scheduled.
“There’s cyclical weakness in stocks, stemming from lower commodity prices to the propensity for a mild recession in Europe,” said Raymond Tang, who oversees about $15 billion in Kuala Lumpur as chief investment officer at CIMB-Principal Asset Management Bhd. “There are always concerns about China’s economy and credit risks, whether it’s just worries or something that will break the camel’s back. So far, they’ve been well managed.”
Asian Index
About three stocks fell for every two that rose today on the Asian equity gauge that excludes Japan, where markets are closed for a holiday.
The Hang Seng Index, which has advanced on just four out of 15 trading days this month through yesterday, swung between gains and losses. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong added 0.3 percent after closing at a two-month lowyesterday. The Shanghai Composite Index advanced 0.7 percent.
The manufacturing data is “a really encouraging figure, but it does not suppress concerns over China because we have seen a broad-based decline in most indicators,” said Desmond Chua, a strategist at CMC Markets in Singapore. “We’re seeing this knee-jerk rebound in the Aussie dollar. That shouldn’t be surprising, given that there was a lot of priced-in expectations for the manufacturing PMI to come in much weaker.”
‘Slow Grind’
The Markit iTraxx Asia index increased 2 basis points to 95 basis points as of 8:40am in Singapore, according to RBS prices. The measure is poised to advance for a second consecutive day and its highest close in a week.
“Credit seems to be on a slow grind downward,” said Tse Chern Chia, head of Asia fixed income at UOB Asset Management in Singapore. “This is periodic weakness that we see. People are worried about interest rates rising and global growth slowing. But the China PMI was satisfactory and things will get better again after this correction.”
FTSE Outlook
Todays pivot is 6793 so I expect initial resistance there, especially if the bounce off this 6770 area continues. I closed my 6770 long yesterday just after the bell but if still running (it just missed the stop level) then it might be worth holding, or hopping back on. Above the pivot, then the next resistance (if the bulls can break 6800) is 6832 and 6850. 6885 is flagged above that but i doubt it will get that high today. Mentioning anyway! Support wise, the bottom of the Bianca’s are 6756, with 6700 and 6637 lower down. Doubt it will get the lower one but again, mentioning anyway!
I have put a dip down from the 6793/6800 area to the bottom of the Bianca channels with todays arrows, however, whilst there is resistance there it might not dip that low. Looking at the S&P it could quite easily push back up to 2007 today. The reason I think it might not dip that low is that the 30min EMAs are gearing up for a cross to the bullish side, having been bearish all day yesterday.