Good morning. Well Friday was interesting, we failed to break the 6500 area and saw a drop all the way back to the 6393 area that has been holding as support for a while. I expect us to have a bounce today as the risk of all-out war over Syria abates, though it might well be fairly quiet as the US is closed for Labor Day, to around 6460ish. Fridays long worked, but not as well as I expected – I think the market was unsettled by the Government losing the vote over Syria, however it seems that the US isn’t rushing in now either. Last night there was positive news out of China that’s manufacturing expanded, hitting a 16 month high. That bounce might only last today though (also helped by being the beginning of a new month), with more downside later this week as we hit the top of the Bianca channels once again. If 6393 breaks then 6338 is likely, possibly 6270. For a really bearish outlook, there is a chance that if 6150 breaks then we will see 5550 would could be a good long term swing low for an entry.
Asia Overnight from Bloomberg
Asian stocks rose for a third day, copper gained and the Australian dollar strengthened as Chinese manufacturing expanded. U.S. stock-index futures advanced and crude fell as prospects of an imminent strike on Syria faded. The MSCI Asia Pacific Index added 0.8 percent at 2:19 p.m. in Tokyo. Japan’s Topix Index increased 1.1 percent and Standard & Poor’s 500 Index (SPA) futures rose 0.7 percent. Indonesia’s Jakarta Composite Index fell 2.1 percent after the nation reported a bigger-than-expected trade deficit. Copper climbed 2.2 percent and silver rallied 2 percent. The Aussie strengthened 0.8 percent versus the dollar. West Texas Intermediate crude sank 1.5 percent to $106.07 a barrel.
China’s economy is strengthening after a two-quarter slowdown, with a manufacturing gauge rising to a 16-month high in August. Data today may show euro region factory output maintained growth in August. India’s slowest economic expansion since 2009 adds pressure on Prime Minister Manmohan Singh to stem a slide in the rupee. In the U.S., where markets are closed today, President Barack Obama delayed action against Syria by seeking approval from Congress.
“Growth expectations globally continue to improve,” Michael Kurtz, Hong Kong-based chief global equity strategist at Nomura Holdings Inc., Japan’s largest brokerage, said in an e-mail. “An ongoing rebalancing in China keeps growth there largely on a moderating trend.”
Outlook
With 6393 holding again it’s a good sign for a decent bounce today, which puts the top of the Bianca channels back in play again. With the US closed today then we may well get a fairly flat day so that’s worth bearing in mind. I have initial resistance at 6465 so have plotted a dip from there, before a further rise to test the channel tops and Fridays high at 6504. There is a chance that we overshoot to 6518 though which would be a “safer” short than the 6500. Today’s pivot is 6441 which could act as support for the initial dip if we see one. With the US closed it will be the S&P algos trading the futures, and that has support at 1628, with resistance at 1646 (where we are pre market) and 1655.