Good morning. 6920 held for a brief moment, but it dipped down to the lower support at 6905 in the end, which then saw a bit of a bounce. Breaking below that 6920 makes things look a little weaker for the short term. I think we might see the 20 day Bianca at 6878 today, as there was no clear direction yesterday. Yellen repeated in her second day of testimony to U.S. lawmakers that inflation and wage growth remain too low to warrant rate tightening at the Fed’s next meeting.
US & Asia Overnight from Bloomberg
(Bloomberg) — Asian stocks swung between gains and losses as consumer stocks and utilities declined and energy shares rallied after a surge in oil yesterday.
The MSCI Asia Pacific Index gained less than 0.1 percent to 146.25 as of 9:15 a.m. in Tokyo. The measure climbed to its highest level since Sept. 11 yesterday after Federal Reserve Chair Janet Yellen indicated an increase in interest rates is unlikely before mid-year. Yellen repeated in her second day of testimony to U.S. lawmakers that inflation and wage growth remain too low to warrant rate tightening at the Fed’s next meeting.
“While fears of an earlier-than-expected hike in U.S. interest rates have been calmed, valuations in many markets are starting to look stretched,” Michael McCarthy, chief strategist at CMC Markets in Sydney, said by phone.
The regional benchmark index traded at 14.6 times estimated earnings at Wednesday’s close, the highest since March 2013, according to data compiled by Bloomberg.
Japan’s Topix index gained 0.2 percent. South Korea’s Kospi index slid 0.2 percent. Australia’s S&P/ASX 200 Index lost 0.4 percent. New Zealand’s NZX 50 Index was little changed after closing at a record high yesterday. Markets in China and Hong Kong have yet to open.
Brent crude surged 5.1 percent in London on Wednesday as Saudi Arabia signaled stronger demand for oil, countering a rise in U.S. stockpiles.
Futures on the Standard & Poor’s 500 Index were little changed today. The U.S. equity benchmark lost 0.1 percent yesterday, while the Nasdaq Composite Index halted its longest rally since 2009. Hewlett-Packard Co. tumbled the most in 18 months after saying earnings will be hurt by dollar gains, while Apple Inc. slid 2.6 percent.[Ref]
After yesterdays price action and the break with the 3rd test of the 10 day Bianca channel, I am feeling a bit bearish now, especially if 6904 breaks today, as then I expect we will test the bottom of the 20 day Bianca at 6878 – a level that is likely to see a bounce. As with the 10 day channel test, 2 times it will bounce and then probably break through on the 3rd test. If this level holds on the first touch today then we could get a decent bounce back to 6938 and higher – the top of the Bianca channels are 6977/6987. 6886 is also the bottom of the 10 day Raff so couple of decent supports around this area. If the bulls do their thing today though, then they will need to break 6938, which will lead to the top of the Bianca’s – 6977 to start. Bit of a slow day yesterday so pausing for breath. Todays pivot is 6936 so I think an initial short here for a dip down to the 6878 level is worth a go.