Good morning. Well the 6680 long worked out best running to target in the end yesterday. The short at 6705 was a little early, getting stopped out, but then the FTSE fell to the bottom of the Bianca areas at 6665 after all. Bit choppy in the evening as the US brought it right back up again to 6710, then a drop back to the closing level. Ever get the feeling it doesn’t know what it wants to do!?
There is quite a large divi today, 14.2 points so we may see a rise towards the close today with some divi hunters, though they have been pretty scarce recently. There is quite good support at 6640 today looking at the Bianca chart – 10 day and 50 day there, and we are pretty much testing the 20 day channel bottom as I write this, at 6675.
Asia Overnight from Bloomberg
Asian stocks dropped, with Shanghai shares retreating from the year’s highest close, and Australia’s dollar slipped as a private gauge of Chinese services industries fell to a record low. Emerging-market currencies climbed as corn and soybeans declined.
The MSCI Asia Pacific Index fell 0.4 percent by 1:40 p.m. in Tokyo. Standard & Poor’s 500 Indexfutures lost 0.1 percent after the U.S. gauge rebounded from its worst week since 2012. The Shanghai Composite Index decreased 0.3 percent and most Hong Kong shares declined. The Aussie weakened 0.1 percent to 93.23 U.S. cents as the country’s central bank left rates unchanged. Malaysia’s ringgit gained 0.3 percent and the Philippines peso added 0.4 percent. Corn and soybeans lost as much as 0.3 percent.
A purchasing managers’ index of China’s non-manufacturing sector fell to 50 in July, the borderline between expansion and contraction and the lowest reading in data from HSBC Holdings Plc and Markit Economics. The Reserve Bank of Australia reiterated a forecast for interest-rate stability, while India’s central bank decides today on monetary policy before the U.K. and U.S. report services data. Tom DeMark, the developer of market indicators, said the Shanghai Composite Index will end its world-beating advance within days and fall about 10 percent.
“The Chinese PMI figures came in a bit below expectations, showing a stalling of the recent upturn in the Chinese data, so that’s putting some downward pressure on commodity currencies like the Aussie,” said Desmond Chua, a strategist at CMC Markets in Singapore. “The Aussie will remain above the 93 U.S. cents.”
Asia Gauges
Five stocks fell for every three that advanced on the Asia-Pacific gauge today, with seven of the 10industry groups retreating. The measure trades at 13.5 times estimated earnings, compared with 15 times for the Stoxx Europe 600 Index and 16.2 times for the S&P 500.
The Shanghai Composite slid after closing at 2,223.33 yesterday, the highest level since Dec. 10. China’s benchmark equity index, which surged 9.9 percent from June 19 to yesterday, will erase those gains and drop below this year’s intraday low of 1,974.38, DeMark wrote in an e-mailed response to questions from Bloomberg News. He said the losses may occur over about six months.
Taiwan’s benchmark stock gauge slumped 1.7 percent, the biggest drop since April 25, and is trading at the lowest level in seven weeks. The Hang Seng China Enterprises Index fell 0.6 percent in Hong Kong and the Hang Seng Index (HSI) fluctuated, with three companies retreating for every two that advanced.
S&P
Better-than-estimated earnings from Warren Buffett’s Berkshire Hathaway Inc. (BRK/B) and rising energy stocks helped ignite gains yesterday in the S&P 500, which slid to a two-month low last week as about $1.2 trillion was wiped from global equity values.
FTSE Outlook
Todays pivot is 6688 so we may see initial resistance there; the gains yesterday afternoon were wiped out quite quickly, though the bulls did try to break 6705, which shows there is still fear around. Major support is still at the 6622 level, a break of which leads to 6590 and possibly 6500. 6716 was certainly resistance for yesterday as the market spent a few hours banging on that level. If the price breaks above the pivot today that will be the first level to take some profit, then 6725. Above that 6748 is the top of the 10 day Bianca channel, then possibly 6785. I am still feeling slightly optimistic for the start of this week before more falls towards the end – so shorting off key levels probably tomorrow should be a good play.
If the pivot does hold as resistance then the first support below that is 6675 (bottom of the 20 day Bianca) and then 6640 (10 day Bianca channel bottom). For today I am envisaging a bit of a V shape with a dip and rise. Longs around 6650/6640 could be alright for a run to 6700 again. There is a pretty decent 30 minute channel in play too which tallies with those daily chart levels.