Support around 6635/6640, resistance 6900. Turning bearish…….

Good morning. Was a bit hasty not taking the long at 6851 yesterday after all as it did indeed bounce. I had got spooked by the S&P losing 10 points (off the back of poor data mostly) and the FTSE not holding above 6870 as it felt the bulls had lost it at that point – just goes to show how its so hard to call as it bounced off the 50 level back to 6875, while the S&P regained 1925. Certainly tricky at the moment and maybe a sign of uncertainty and topping out? I do think the worm is starting to turn, as even with Gold continuing its decline, the FTSE hasn’t put on that much upside. Asia has been pretty strong overnight with improved Chinese PMI news though – their news is certainly fluctuating between good and bad at the moment.

6877 looks the key level to break then today for the bulls to then test the top of the Bianca channels around the 6895 area.

Asia Overnight from Bloomberg
Asian stocks rose, extending a six-month high on the regional benchmark index, as concern eased about a slowdown in the world’s second-largest economy.

“We are seeing a bottoming in terms of growth in China,” Sean Fenton, who helps manage about $1 billion in Sydney at Tribeca Investment Partners Ltd., said by phone. “The manufacturing sector is starting to bottom out and there’s some talks of mini stimulus.”

The final reading of a China factory measure for May from HSBC Holdings Plc and Markit Economics came in at 49.4, missing economist forecasts for 49.7. That comes two days after a government gauge signaled the fastest growth in five months. Levels below 50 signal contraction in the sector. China’s officialPurchasing Managers’ Index rose to 50.8 in May, the highest level since December and topping the median economist estimate in a Bloomberg survey, a June 1 report showed.

Regional Gauges
China’s non-manufacturing purchasing managers’ index rose to 55.5 in May from a previously reported 54.8 in April, according data released today by the Beijing-based National Bureau of Statistics and the China Federation of Logistics and Purchasing.

Hong Kong’s Hang Seng Index gained 0.7 percent and the Hang Seng China Enterprises Index of mainland shares listed in the city rose 1.1 percent. China’s Shanghai Composite added 0.2 percent and Singapore’s Straits Times Index lost 0.1 percent. South Korea’s Kospi index increased 0.1 percent, with KCC advancing 12 percent to 664,000 won.

Japan’s Topix index rose 0.8 percent and Taiwan’s Taiex Index climbed 0.2 percent. Thailand’s SET Index gained 0.5 percent and India’s BSE S&P Sensex Index added 0.2 percent.

Australia’s S&P/ASX 200 Index slipped 0.5 percent, maintaining declines after the Reserve Bank kept its benchmark interest rate at a record low. Rio Tinto climbed 1 percent to A$59.79. New Zealand’s NZX 50 Index fell 0.3 percent.

China Outlook
China’s economy is projected to grow 7.3 percent this year, which would be the weakest pace pace since 1990, according to analysts surveyed in May. Expansion slowed to 7.4 percent in the first quarter from a year earlier, compared with 7.7 percent in the previous period. The government’s target is 7.5 percent.

Futures on the Standard & Poor’s 500 Index lost less than 0.1 percent today. The gauge yesterday extended a record high, rising 0.1 percent, as the Institute for Supply Management twice corrected the reading in its May U.S. manufacturing index.

FTSE Outlook
Well, we still haven’t dipped below that 6850 level as yet though the daily pivot has risen to 6861 and being below that would infer that there is some weakness – it will now switch to resistance rather than support. That said, if the bulls can break 6861 initially this morning then a rise to 6877 is likely – being yesterdays high. Above that we have the Bianca channels at similar levels to yesterday – 6895 and 6899 so worth a short there. The Bianca channels are narrow at the moment, and offer support at 6833 and 6808; the top of the Raffs are both at 6908, with 10 day support at 6836. So basically that is saying that a short around the 6900/6910 area with a stop at 6925 should probably come pretty good. If it gets that high of course! It does feel like the bulls are running out of steam a bit, they failed to hold the gains with that late bounce from 6851 yesterday and the S&P is off its high (needs to fall below 1918 to turn properly bearish!).

Overall the FTSE was pretty flat yesterday – just a 25 point range so not really many ideal trading set ups presented themselves. Today I’d be looking to short any rallies to 6877, 6890, 6900 – those sort of areas. A possible long presents itself at the bottom of that 30 minute channel at 6840, supported by the 10 day channels on Bianca and Raff at 6833 and 6837 respectively.