Good morning. I hope you had a good long weekend (if in the UK!). Well wasn’t it all very bullish yesterday, with the S&P virtually reaching that 2003 level that I have mooted in the past. Some selling pressure there though as after breaking 2000 for the first time it has dropped back. I have support at 1995 today, with 1989 below that, which tallies with a dip and rise for the FTSE today, to 6780ish. The news just seemed to be the usual carry on over the long weekend, wars etc. though Germany saw a fourth consecutive drop in business confidence yesterday. So, despite the bullishness there is an undercurrent of worry in the Eurozone, maybe even raising the prospect of QE.
“The eurozone has moved closer to adopting further radical measures to ward off a second recession and a spiral of deflation after its two biggest economies fell deeper into trouble on Monday.
The dual shock of a French government reshuffle and weaker-than-expected German figures threatened to add to the malaise in the eurozone, where unemployment remains stubbornly high, and growth is at a standstill.” From here
So, don’t get too caught up in the bull just yet!
Asia Overnight from Bloomberg
Asia’s benchmark stock index swung between gains and losses after valuations on the regional gauge climbed to the highest level this year. Energy shares rose, while utilities declined.
The MSCI Asia Pacific Index (MXAP) slid 0.1 percent to 148.51 as of 11:49 a.m in Hong Kong. The gauge traded within a narrow range of gains and losses of 0.1 percent. Two weeks of increases pushed the price-earnings ratio on the measure to 13.7 yesterday, the highest since December, as concern eased about conflicts in Iraq, Israel and Ukraine. The Standard & Poor’s 500 Index climbed 0.5 percent yesterday to a record, touching the 2,000 level for the first time.
“Gravity tends to pull on the markets after they’ve had a strong directional move,” Ric Spooner, Sydney-based chief market analyst at CMC Markets, said in a phone interview. “The market needs good news to sustain it and in the absence of this, tends to drift down. Valuations are fairly full.”
Regional Gauges
Japan’s Topix index fell 0.4 percent and Hong Kong’s Hang Seng Index declined 0.1 percent. The Hang Seng China Enterprises Index of mainland stocks traded in the city added 0.2 percent. The Shanghai Composite Index lost 0.4 percent and Singapore’s Straits Times Index was little changed.
South Korea’s Kospi index rose 0.5 percent, with Hyundai Motor gaining 1.1 percent to 227,500 won. Australia’s S&P/ASX 200 Index fell 0.1 percent as Boart Longyear tumbled 14 percent to 16.75 Australian cents. New Zealand’s NZX 50 Index added 0.3 percent and Taiwan’s Taiex Index rose 0.1 percent. Futures on the S&P 500 slipped less than 0.1 percent.
Data yesterday showed the pace of new-home sales in the U.S. fell to the slowest in four months in July. Housing has advanced in fits and starts this year, buffeted by tight credit and slow wage growth. Federal Reserve Chair Janet Yellen signaled last week that while slack remains in the U.S. labor market, interest rates could be raised sooner than expected.
FTSE Outlook
The morning after the long weekend when the UK has been off and the rest of the world hasn’t is always a little tricker, generally as the FTSE digests the action. The S&P has dipped off since breaking through 2000, and interestingly that CMC analyst in the Bloomberg news bit above is intimating a dip in the absence of good news to maintain that run. I tend to agree, and expect a dip on the FTSE from the 6822 resistance area to the support at 6780, where we have a rising PRT channel line on the 30min, and also the bottom of the 10 day Bianca channel at 6773. Todays pivot is 6769 as well, so 3 supports around that area.
If the bulls manage to break 6822 today then the next resistance is 6841 where we have the top of the 10 day Bianca, then 6854. Bigger picture resistance is 6898.
If the 6770/80 level breaks then the bears will get onto a bit of a charge and next supports are 6748 and 6714.