Good morning. I hate trending days! Which is what we had yesterday, it never pulls back to support to get a good entry and it busts through resistance levels to take out the trades (or vice versa if its trending down). Anyway, the short at 6670 got stopped out and the other risky one at 85 did too, so not really ideal and no dip to get long on. On the flip side the 20 day Bianca channel top around 6698 held despite the bulls trying to break 6700. For today the level has moved to 6709, so will be watching that area. Also of note is that all 3 Bianca channels are in the 6700 area (6693,6709,6729) so we might see a bit of resistance here.
Slightly weaker Chinese PMI data overnight, printing 48.3 in April, just matching estimates, and showing continued weakness (being below 50).
Macdonalds results missed slightly yesterday, but today is to tech heavyweights – Facebook and Apple, both after the bell so will be volatile later as they have a big effect.
Asia Overnight from Bloomberg
Asian stocks erased gains after Chinese manufacturing data signaled persisting weakness in the world’s second-largest economy and Australia’s inflation rose less than expected.
The MSCI Asia Pacific Index was little changed at 138.61 as of 12:46 p.m. in Tokyo, erasing gains of as much as 0.6 percent. The preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was 48.3 in April, matching the median estimate of analysts surveyed by Bloomberg News. While that was higher than the final March figure of 48, the reading remains below the level of 50 that is the dividing line between expansion and contraction.
“Asian indices are coming off their highs as Chinese manufacturing data continue to contract,” Desmond Chua, a Singapore-based strategist at CMC Markets said by phone. “It seems China’s 7.5 percent GDP growth target is too optimistic at this stage.”
China’s Shanghai Composite Index (SHCOMP) lost 0.5 percent, while the Hang Seng China Enterprises Index of mainland stocks traded in Hong Kong declined 1.1 percent. The city’s benchmark Hang Seng Index dropped 0.7 percent.
Premier Li Keqiang last week said China isn’t considering “strong” stimulus, and reiterated that economic growth a bit higher or lower than 7.5 percent is within a reasonable range. The government yesterday lowered reserve ratios at some rural lenders.
There are “now expectations that the target of 7.5 percent Chinese GDP growth for this year might be the top end of guidance,” Tony Farnham, an economist at Patersons Securities Ltd. in Perth, said by phone. “The actual growth number may be a little below that.”
Futures on the S&P 500 were little changed today. The U.S. equity gauge climbed 0.4 percent yesterday, rising for a sixth day as health-care shares surged amid a $45.7 billion bid for Allergan Inc. and earnings from companies including Netflix Inc. and Harley-Davidson Inc. topped estimates.
Of course its results season at the moment and yesterday was the first day back after the 2 bank holidays so it was always going to be a little tricky. For today we have the pivot at 6671 and I think after making the gains yesterday the bulls will be keen to maintain that momentum. However, I do have quite major resistance at 6710 so I think they will struggle a bit there, and as mentioned above there are 3 Bianca channels nearly in play at this level, as well as the 20 day Raff at 6730ish. As such I do think it might pull back shortly. For today on both the 10 and 30 minute charts we have decent channels in play, both showing support around the 6670 area so with the pivot there I think that area is worth a long. If we don’t get the dip again then I am shorting at 6709 off the 20 day channel. Despite dipping from 6698 yesterday, its not really been that bearish which is why i think we might test the channel again. 2 tests of a resistance (or support) I will trade, generally if its tested a third time then its likely to break, so if we test that channel again tomorrow it will invalidate the bearish element and we might rise to 6780.