Profit Taking, Data Send’s Asia Lower

Both shares in in Japan and Shanghai were sharply lower today as weak economic data from China hurt sentiment. After opening for the first time in 2014, the Nikkei has fallen back below 16,000 on severe profit taking.

Investors also took in comments from Federal Reserve Officials last week. Ben Bernanke reiterated that rates would remain super low and Philadelphia President Charles Plosser remained his always hawkish stance. We will be waiting for the release of last month’s Fed minutes to get a further sense of monetary policy. This is the meeting the FOMC decided to wind down their massive QE program. Area Fed chiefs will also be making comments and speeches all week long and we will get the non-farm payroll report later this week.

As for this morning’s concerning data, China released its services PMI which showed it has now hit a two year low in December. This is adding to signs of a cooling trend in their economy. The Shanghai sold off 1.9 percent on the news.

STOCKS

Last week, the DJIA finished up 28.64 points to close at 16,469.99. For the week the blue chips index lost 0.1 percent. The S&P 500 was flat on Friday as it lost half a point to finish at 1,831.37. The S&P was down 0.5 percent for the week.

The Nasdaq Composite lost a little over 11 points to close at 4,131.91. It lost 0.6 percent for the week. Shares of Apple (NASDAQ: AAPL) lost over two percent on Friday leading loser on the tech heavy NASDAQ.

This is a red day for most Asian and Pacific Rim markets as investors are booking profits in Japan and the Shanghai has also tumbled. The Nikkei ended 2013 with nine straight winning sessions and a total increase of 57 percent. Today, investors are locking in profits as the market is currently down 1.96 percent. Also hurting sentiment is the USD/JPY Forex pair which has come off last week’s five year high.

The Mainland Shanghai Composite is down 1.93 percent as the sellers continue to dominate this market. A poor services PMI has hurt sentiment as investors continue to fret over a cooling economy. The Australian ASX 200 is down 0.5 percent as lower commodity prices as investors are waiting on economic data due this week. We will get retail sales, trade data and building figures out of Australia.

CURRENCIES

EUR/USD (1.3583) has shown some bearish signals. It failed at 1.39 last week and has, since then, plummeted. The euro then could not break or close back above 1.3830 and then fell well below 1.3725. We are now targeting 1.35 and then 1.3450. We remain bearish while below 1.36.

USD/JPY (104.326) has paused its bullish momentum for now. We have hit our first target near 105.501 and are consolidating a bit. We could see some profit taking to 103. If that holds, expect a bounce higher and if it breaks we can target 101.60. We remain bullish for 109 while above 104.10.

GBP/USD (1.6356) has moved lower after hitting a short term top at 1.66. We are bearish below, and top confirmed if we move below 1.6395. From there we target 1.63 and lower. If 1.62 holds, expect another rally back to 1.67/1.6750.

COMMODITIES

WTI (94.02) has been falling and fell even more overnight and Friday. We are targeting 93.50 at this point and then maybe 93. A break below that last level tests the important level squarely at 90.

WTI Brent (107.04) while we remain bullish here, we have dipped further. We are now below 108 and could test 105.50 and lower. We need to watch this closely as the bullish trend could be ending for a fall to 104.50.

Copper (3.3515) rose above 3.35 and we are close to a key level at 3.40. We have to break above 3.4 to continue this rally, if not expect some profit taking towards 3.25 or 3.20.

Today’s Outlook

We have a lot of data due out this week including the U.S. jobs report due out later this week. The only big data for today is the U.S. ISM non-manufacturing data.