A funny day yesterday that did in fact play out as predicted but only after a little rise up to 5780 first. Asia is a little weaker overnight on anticipation of bad debt sales from Spain and France.
Asia overnight from Bloomberg
Asian shares fell and South Korea’s won dropped before Spain and France sell 13.5 billion euros ($17.6 billion) in debt. The yen weakened for a third day as Bank of Japan Governor Masaaki Shirakawa pledged to continue monetary easing. The MSCI Asia Pacific Index (MXAP) slipped 0.3 percent as of 1:17 p.m. in Tokyo, led by declines in Japanese equities. The Hang Seng China Enterprises Index rallied 0.8 percent and futures on the Standard & Poor’s 500 Index added 0.1 percent. The yen lost 0.2 percent and South Korea’s won slid 0.4 percent. Ten-year Treasury yields held below 2 percent for a fifth day. Copper retreated 0.3 percent, while corn jumped 1.3 percent for the biggest gain in more than two weeks.
Well yesterday’s prediction was bang on the money with the drop to 5730! We found support there and I am now expecting a rise up to the top of the 10 day channel today – 5820 area – if we can break the resistance at 5785 (yesterday’s high). You can see the resistance levels on the chart below. Pre market we are around the top of the 20 day channel at 5770, however I think we might see a little push past this today before dropping back next week. The shorter term trend is now up and the 10 day channel has started breaking out to the upside from the 20 day channel as you can see below, reflecting the recent bullishness. I think the market is hoping for further QE when required despite the denials from the Fed, and they are probably right. We are a long way from any problems being solved with slow or no growth in pretty much every country. Despite the short term trend being up I am not an over excited bull at this stage as I don’t think tis going to go that much higher, as I mentioned yesterday – 5830 tops? Of course it’s possible that we may not break the 5770/80 top of the 20 day area at all. Today’s pivot is 5753 so we should see support there on any initial weakness.
In summary I am thinking a rise up to 5830 before the bearishness kicks in, IF we can break 5785. If we can’t then its downhill from there.