FTSE 1oo Support 6724 6700 6696 6677
FTSE 100 Resistance 6779 6794 6795 6870

Good morning. We got the bounce after a lot of faffing around at 6670 in the end, with the bulls managing a 100 point rise helped by bullish comments from the Fed’s Brainard about keeping rates low. The S&P managed 2160 in the end, whilst the 20 day Raff on the FTSE sort of held at 6670 (slight overshoot though to 6655). Question now is whether that bounce was the start of a rally back or just a dead cat bounce as suspected it would be yesterday. Asia has been weak, and the ASX200 has sold of steadily during their session, though the bottom of the Bianca channels are back in play now with support at 6696 (20 day) and 6677 (10 day).

US & Asia Overnight from Bloomberg

Asian stocks traded near a one-month low and U.S. equity index futures fell with oil as investors assessed the outlook for Federal Reserve policy and China’s economy following a turbulent couple of days in financial markets.

About the same number of shares rose as declined on the MSCI Asia Pacific Index, which sank more than 3 percent over the last two trading sessions. Hong Kong shares pared gains and Shanghai equities fluctuated after a slew of Chinese data added to evidence that growth has stabilized in the world’s second-biggest economy. Futures on the S&P 500 Index lost ground as oil dropped to about $46 a barrel. The yen, gold and U.S. Treasuries advanced after dovish comments from Federal Reserve Governor Lael Brainard damped expectations for an interest-rate increase at next week’s Fed meeting.

Brainard signaled her reluctance to raise borrowing costs even as she acknowledged that the U.S. economy was making gradual progress toward achieving the authority’s goals. Her comments came after financial markets were jolted out of a period of relative calm by signs central banks in Europe and Japan are questioning the ability of loose policy to revive inflation and economic growth. The Fed and the Bank of Japan have policy decisions on Sept. 21, with the latter weighing the case for more stimulus.

“With Brainard’s remarks, rate-hike expectations have backed down,” said Toshihiko Matsuno, a senior strategist at SMBC Friend Securities Co. in Tokyo. “But the market isn’t likely to take on an aggressive buying mode before the results from the BOJ and the Fed’s monetary policy meetings next week.”

The probability of a Fed rate hike at next week’s meeting dropped by eight percentage points on Monday to 22 percent, futures prices indicate. The European Central Bank left policy unchanged at a review last week and President Mario Draghi played down the prospect of further stimulus. Inflation data for Germany and the U.K. are due Tuesday, while financial markets in India are shut for a holiday.

Stocks

The MSCI Asia Pacific Index rose 0.2 percent as of 1:06 p.m. Tokyo time, after sliding on Monday by the most since June. Shares in Indonesia, Malaysia and Singapore fell after holidays led to them missing out on the last session’s rout, while the Stock Exchange of Thailand Index climbed for the first time in a week.

Hong Kong’s Hang Seng Index gained 0.8 percent, after tumbling 3.4 percent on Monday, and the Shanghai Composite Index was down 0.2 percent. China’s factory output, fixed-asset investment and retail sales all expanded in August by more than economists forecast, data showed Tuesday.

“Though China’s industrial production and retail sales beat expectations, people won’t expect data to continue to improve,” said Castor Pang, head of research at Core-Pacific Yamaichi Hong Kong. “The data also don’t signal any intention for economic stimulus, so the market can’t rebound strongly.”

Samsung Electronics Co. jumped 5.1 percent in Seoul, recovering from a 7 percent slide in the last session that stemmed from a recall of its Note 7 mobile phones.

Futures on the S&P 500 fell 0.3 percent, after a 1.5 percent advance in the U.S. benchmark. Contracts on the FTSE 100 added 0.5 percent.

Currencies

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, was little changed after dropping 0.3 percent on Monday. The yen strengthened 0.1 percent to 101.77 per dollar, after gaining 0.8 percent in the last session as Brainard said the case for the Fed to raise rates was “less compelling.”

“Dollar-yen is obviously one of the most Fed-sensitive currency pairs,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “In the wake of Brainard’s speech and with looming data likely to tilt to the soft side, we expect pricing for Fed tightening to wane further.”

Malaysia’s ringgit sank as much as 1 percent from Friday’s close to its weakest level since June after a decline in oil prices dimmed prospects for Asia’s only major net exporter of crude. In addition, troubled state investment company 1Malaysia Development Bhd. faces an arbitration hearing in which Abu Dhabi’s sovereign wealth fund has filed a claim for $6.5 billion.

Commodities

Crude dropped 1 percent to $45.85 a barrel in New York, after gaining 0.9 percent on Monday. U.S. data due Wednesday are forecast to show the country’s oil inventories rose by 4 million barrels last week, which may fuel concerns over a glut. OPEC also revised its projections for rival supplies in 2017, predicting an increase in output from outside the group instead of a decline, the latest sign that the global surplus is persisting. Major producers are due to meet in Algiers later this month.“Inventories remain high, they’re well above five-year trend levels,” said David Lennox, a resources analyst at Fat Prophets in Sydney. “The market is just waiting to see what happens at the OPEC meeting. If there is a concrete deal and it’s actioned, we’d expect to see prices rally.”

Gold gained for the first time in a week, rising 0.2 percent, as Brainard’s comments weighed on the dollar. Zinc rebounded from the lowest level in a month in London, supported by the economic data from China, the world’s largest consumer of industrial metals. Chinese industrial production increased 6.3 percent from a year earlier in August, the figures showed.

Bonds

U.S. Treasuries due in a decade rose for a second day, pushing their yield down by two basis points to 1.65 percent. The rate touched 1.70 percent on Monday, the highest level since June.

The yield on Japan’s 20-year bond fell 2 1/2 basis points to 0.44 percent after an auction of the tenor achieved a higher price than was forecast by any of the 13 traders in a Bloomberg survey. [Bloomberg]

FTSE 100 Outlook and Prediction

The key now will be if the lows yesterday hold and the bulls can get a rise back up. However, since we rose yesterday the short term charts are still weakly bullish, whilst the daily charts are not, showing decent resistance at the 6795 area, where we have the 25ema on the daily chart, and also the R1 and 2 hour coral. The bulls will be keen to hold the 6700 area if we get that low this morning, though we do have the pivot for initial support at 6724, though it looks weak to start with and we are pretty much on that as I write this.

The 2 hour chart has gone onto weak bull though not showing any ideal entry level, whilst the 30min chart has 6700 and 6677 as support. Going to be another interesting day ahead I think. For further upside the bulls will need to break the 6810 area, which opens up the chance for 6900 again. But it does look weaker to me and there is more likelihood of testing some lower levels, possibly 6600 in the near term. I am watching that 6795 area quite closely today.