Good morning. Well, yet again the bears were out in force, the bulls failed to break that 6560 resistance area and it was one of those days where you wonder why you didn’t just go short there and leave it for the day. Needless to say every support level got broken, 6525, and even the pivot which was 100 point below where we opened! Overnight we have seen 6313! All on worries over Europe again (did they ever really go away?) and George saying that the UK will be dragged down by Europe. Bear in mind there is going to be some political background to all these sort of things now to ensure victory at the GE next year. Anyway, The bottom of the Raffs at 6294 and 6271 are coming into view today, especially with another dip below 6339. Europe is still pretty sickly, and October once again maintains its track record as one of the most volatile months.
Asia Overnight from Bloomberg
Asian stocks declined, with the benchmark index headed for a six-month low, on concern a slowdown in Europe may hurt global growth and as Hong Kong’s government scrapped talks with protesters. Bond risk rose as metals retreated and Brent crude fell to the lowest since 2010.
The MSCI Asia Pacific Index lost 1.5 percent by 12:46 p.m. in Tokyo, set for its lowest close since March. Standard & Poor’s 500 Index futures declined 0.2 percent after the gauge fell the most since April, while contracts on the FTSE 100 Index sank 1.1 percent. Copper in London slid 0.7 percent while Brent fell as much as 2.2 percent. Malaysia’s ringgit retreated from a two-week high before the budget. The cost of insuring corporate and sovereign bonds rose in Asia, Japan and Australia. (AS51)
European Central Bank President Mario Draghi said there are signs the region’s recovery is losing momentum, sending a gauge of volatility to an eight-month high. Federal Reserve officials said the U.S. economy may be at risk from a global slowdown as the International Monetary Fund this week cut its outlook for global growth. Hong Kong canceled talks with protesters after leaders of the movement called more rallies.
“Draghi’s been saying a little bit of this for a while but people start listening more when the market is fully valued,” Wayne Wilbanks, chief investment officer at Wilbanks, Smith & Thomas Asset Management LLC in Norfolk, Virginia, said on Bloomberg Television’s “First Up.” “Europe is crawling, their economic growth is very slow. The Fed can’t raise rates, there’s no way.”
Equities Rout
The S&P 500’s 2.1 percent drop yesterday erased the 1.8 percent jump recorded Oct. 8, which was the index’s steepest one-day advance in almost a year. The Chicago Board Options Exchange Volatility Index surged as much as 28 percent to 19.38, the highest level since February.
The MSCI All-Country World Index dropped 0.4 percent, extending yesterday’s 1 percent loss. Minutes of the Fed’s Sept. 16-17 meeting released this week damped speculation that policy makers will bring forward their timeline for benchmark rate increases.
The MSCI’s Asia Pacific gauge is headed for a 1 percent drop this week, its fifth straight weekly decline and the longest run of losses since February, data compiled by Bloomberg show. Equity indexes in Australia and South Korea fell more than 1 percent. Taiwan’s markets are shut today.
Japan’s Topix (TPX) slumped 1.4 percent, set for a second weekly loss, as the yen headed for its first weekly gain since August. The currency was at 107.86 per dollar after yesterday reaching 107.53, the strongest since Sept. 17. It’s set for a third week of gains against the euro as Draghi pledged yesterday to expand stimulus measures if needed.
Hong Kong Protests
Sagging exports to Russia and China are putting Germany on the verge of recession and Chancellor Angela Merkel’s domestic policies are also holding back growth, according to an outlook report presented by the four institutes that advise the government. The group cut its 2014 German economic growth forecast to 1.3 percent from 1.9 percent in April and trimmed next year’s to 1.2 percent from 2 percent.
Hong Kong’s Hang Seng Index sank 1.6 percent, while the Hang Seng China Enterprises Index fell 1.7 percent. China’s yuan halted a four-day advance against the dollar in offshore trading. Pro-democracy protestors who want China to scrap a plan to vet the city’s election candidates have been blockading key roads for almost two weeks. The occupation is illegal and must end, said Carrie Lam, Hong Kong’s No. 2 official.
FTSE Outlook
Well its pretty bearish isn’t it. Rare to see the FTSE drop so much, with a complete crossing of the Bianca channels in one day, and an overnight low even further below – though it was a spike down to that 6315 area. Todays pivot is 6467 – possible that we bounce 100 today of course the way things are. Above that the next resistance is 6524 (10 day Bianca) and 6532(20 day Bianca).
I hadn’t expected the pivot to be hit yesterday as it was so far below where we opened but just shows how weak it was – and very hard to trade. For today we have initial support at 6355 where we are as I write this, with 6339 below that. The 2 Raff channels have their lows at 6295 (10 day) and 6272 (20 day)and considering we dipped off the top of them less than 48 hours ago, the 6272 area might well hold. If not then 6230 is support below that.
For today I have plotted an initial rise up to the 25EMA on the 30min at 6375, based on this 6355 holding initially (though technically its weaker now as it has been broken overnight). From 6375 a dip down to 6339 before a bit of bull to 6400 – the top of the 30 minute channel. Make or break there for a push to the pivot at 6467, or more downside, most likely to 6272. Could well get another dead cat bounce today.