Markets Drift Higher on Lack of Negative European News; FTSE 100 Still Seen Failing at 5390

Safe haven assets are seeing some modest selling ahead of macro data out of the US.  Today’s reports will be the MBA Mortgage Applications survey and the Existing Home Sales figures, with the market estimates calling for a very strong number in the latter (the highest since the middle of 2010).  This report will follow PMI data out of the Eurozone, Germany, and France.  Futures markets in the UK are showing an unchanged open as traders wait for the minutes from the latest monetary policy meeting with the Bank of England (BoE).

In US equities, earnings reports will be released from Hewlett Packard, Analog Devices and Express Scripts.  The main stock story yesterday came from Dell, which dropped 5.1 percent in the aftermarket session after fourth quarter earnings missed analyst forecasts.  Downward revisions were also seen for the first quarter 2012, and this brought selling to pressure to not only Dell but to other computer-space blue chips as well.

In Europe, both the DAX and CAC futures are suggesting a lower open ahead of today’s PMI figures and corporate earnings reports from Daimler, France Telecom, and Schneider Electric.  Overnight, we did see some higher PMI data out of China, and this has led many to expect that the PMI data today in Europe will also see some lift in productivity.  It should be noted, however, that the Chinese data was improved but still in negative territory, so there is some scope here for a downside surprise.

The relatively quiet tone in trading is coming from the lack of headlines and the fact that there is no expectation for any immediate changes to the bailout agreement in Greece.  Because of this, macro data will receive more attention, so volatility will likely be highest around the times of these releases and during the beginning of the European and North American sessions.  The slightly optimistic tone did help the Dow Jones Industrial average to move above 13,000 for the first time since the end of 2007 (which was the beginning of the credit crisis).  Going forward, headlines with respect to the ability of the Eurozone to carry out its austerity agreements in an orderly fashion will be the main driver for the Euro and regional equities but volatility in both will likely slow into the close of the week.

Technical Analysis:

Epoch Times Photo

The NZD/USD is showing a downtrend on the hourly charts and this is suggesting of a break of key Fibonacci support at 0.8305.  This is also a historical level and we did see a false break here previously but we have initiated sell positions at current levels looking for a break to new lows.  First target comes in at 0.8250, stops can be placed above 0.8420, for a very good risk to reward trade.

Epoch Times Photo

The FTSE 100 is still having problems with the key long term resistance at 5930.  We have been looking at this level for some time and prices are now seeing a slight rollover with support on the short term time frames coming under pressure now.  If current levels break, expect a drift back to at least 5800, which is now a double bottom.  Long term traders should be looking at sell positions while intraday traders should wait for a drop to 5800 before initiating longs.