Good morning. Well the bottom of the 10 day Bianca held really well bang on 6760 yesterday after all. My long was a bit higher at 6767, and we did get a bit more upside after i closed at 6785. Despite the pre market pricing the bulls didn’t really manage to break 6809 so that is still resistance for today. On the news front housing seems to be slowing, both here and in the US, but then it needed too really. Probably means that the BoE will still be ok for a small interest rate rise at end of Q3/early Q4 rather than sooner (as I have said all along!).
Asia Overnight from Bloomberg
Asian stocks rose, sending the benchmark regional index to a six-year high, while bonds followed U.S. Treasuries lower before the Federal Reserve starts meeting today. Oil fell while New Zealand’s dollar dropped on a reduced milk-price forecast.
The MSCI Asia Pacific Index (MXAP) added 0.3 percent by 2:23 p.m. in Tokyo, with four stocks rising for every three that fell. Foreign buying pushed the Kospi gauge in Seoul toward its highest close since August 2011, while the Hang Seng Index touched levels not seen since November 2010. Standard & Poor’s 500 Index futures were little changed after the gauge ended the U.S. day up less than 0.1 percent. Yields on 10-year Australian government bonds rose four basis points. Oil fell a second day in New York and the kiwi slumped 0.4 percent.
Fed policy makers are expected to cut bond purchases for the sixth time while debating the preconditions for increasing interest rates at their two-day meeting that ends tomorrow. Housing data is due in the U.S. today, with reports on gross domestic product and payrolls also scheduled for this week. The Hang Seng China Enterprises Index yesterday capped a 20 percent advance from this year’s low.
“The equities rally will continue for the rest of the year,” Daphne Roth, Singapore-based head of Asian equity research at ABN Amro Private Banking, which oversees about $207 billion, said by phone. “We’re seeing economic growth filtering through to corporate earnings. While Fed tapering will continue, we believe the earliest interest-rate increase will only happen middle of next year. The Fed is very clear that they will only raise rates provided the economy continues to recover.”
The MSCI Asia Pacific measure trades at 13.6 times projected earnings for member companies, the most expensive valuation since December. The S&P 500 trades at 16.6 times estimated earnings and the Stoxx Europe 600 Index is at 15.4 times, data compiled by Bloomberg show. The MSCI All-Country World Index has a valuation of 15.4.
The Asia Pacific gauge is trading about 15 percent above its lowest close this year, reached in February, and gained 2.4 percent in July through yesterday.
Fed policy makers will cut asset purchases by another $10 billion to $25 billion tomorrow, according to the median of 38 economists’ estimates compiled by Bloomberg. There’s a 63 percent probability the Fed will raise interest rates to at least 0.5 percent by July 2015, based on Fed funds futures, versus a 43.2 percent chance at the end of May.
The U.S. Treasury sold $29 billion of two-year notes at the highest yield in more than three years yesterday as investors bet the economy will be strong enough for the Fed to remain on pace to raise interest rates next year.
Analysts predict U.S. stockpile data tomorrow will show gasoline supplies rose by 1 million barrels last week to the highest level since March. Nationwide crude inventories probably shrank by 1 million barrels, according to a Bloomberg survey.
Violence in Libya and Iraq isn’t affecting the flow of oil from the Middle East, with clashes between militias in Tripoli not spreading to oil-export terminals and the conflict in Iraq sparing the nation’s main oil-producing region.
Todays pivot is 6786 so I expect that to act as support on any dip, though the bulls will be keen to break 6809 first thing this morning for a push to 6843. Below that the bottom of the 10 day Bianca is 6763, which would be the second touch after yesterday and likely to hold if it were to get that low – I don’t think it will. Bull Tuesday after all! As per the arrows I am expecting a bullish day today, initially testing that 6809, dipping back then breaking it on the next leg up. I expect that leg to reach 6843. Above that we have the top of the 10 day Bianca at 6861 and the 20 day Bianca at 6863 (near enough the same). A case of buy the dips today for a run up. Longer term the all time high at 6938 is still resistance.
I have put a long in the trade plan below from 6800 as I don’t expect it to dip down to the pivot, though I will also have a long order there and at the 10 day 6763 level as well.