Morning all. Well we did indeed get the drop from the open yesterday as predicted so hope some of you managed to get on that. in the end it fell all the way to the 24% fib on the daily at 5610 before putting in a bit of a bounce. However, I don’t think, looking at the 4 hour chart, that we will be seeing much of a rally. Spain’s borrowing costs rose above 7% again yesterday and we are now also into reporting season. Alcoa reported last night after the closing bell, and they weren’t as bad as had been feared – is that going to set a precedent for the reporting season? Lots of analysts have lowered their forecasts, which is the only thing slightly bullish as then the results can come out “better than forecast” thus making a bleak picture look better. We also have the loans being kicked to the Spanish banks today.
Asia overnight from Bloomberg
Asian stocks fell for a fourth day and the Australian dollar weakened as Chinese trade data added to signs of slowing economic growth. Oil slumped as Norway ended an energy strike.
The MSCI Asia Pacific Index (MXAP) dropped 0.3 percent at 2:17 p.m. in Tokyo, while futures on the Standard & Poor’s 500 Index declined 0.4 percent. The so-called Aussie retreated against 14 of its 16 major peers. The euro traded near its lowest in two years before reports forecast to show manufacturing is shrinking in France and Italy. Oil fell 1.1 percent in New York, while corn retreated from its highest level in 10 months. China’s imports rose less than anticipated in June while export growth slowed, data from the customs bureau showed today. European governments will jump-start as much as 100 billion euros ($123 billion) in loans to shore up Spain’s banks, Luxembourg Prime Minister Jean-Claude Juncker said after chairing a nine-hour meeting of euro-region finance ministers.
I have plotted the blue arrows on the 30 minute chart below for what I think will happen today. As you can see on the 4 hour the EMA’s have crossed to bearish so bigger picture my stance is bearish, and we also have a wedge developing on the 30 minute – which is the rising green line, and the falling red line. The price will break out of that zone as it gets pinched by those support and resistance areas. Today’s pivot is 5635 which is the area that, at the time of writing, we appear to be dropping off from. I would expect that area to act as resistance also. We might get a little pop higher just to take out some stops of the early bears so watch out for that, stops above 5656 on any shorts should be fine though – that’s the 200ema on the 30min. I was thinking that we might have a pop up to 5700 yesterday but I am not sure we will see that level in the absence of any artificial stimulus to drive us there. I am back into “short the rallies” mode now and looking for sub 5600, initial area 5570.