FTSE 100 resistance 7026 | Support 6962 6934 | Asia climbs | Upbeat earnings

FTSE 100 Support 6962 6950 6934 6927
FTSE 100 Resistance 7014 7015 7026 7056 7090 7130

Good morning. Pretty much all the trades worked out well yesterday with a great short from the 7062 level; the bears were in control for the whole day (surprisingly for Bull Monday!) and managed to break through the 7020 level too to a low of 6980. The bears are certainly gaining in strength now, with the bulls struggling to get prices back to the 7130 level. They will probably need some political support again to manage that now.

US & Asia Overnight from Bloomberg

Asian stocks rose to a two-week high and industrial metals advanced, buoyed by a generally upbeat corporate earnings season and reports showing manufacturing is picking up in the U.S. and the euro area. The dollar strengthened versus the yen.

About three shares advanced for every two that fell on the MSCI Asia Pacific Index, with Nidec Corp. and SK Hynix Inc. rallying after profits beat estimates. South Korea’s Kospi index dropped and the won weakened amid concern the economy will be impacted by rising tensions with China. The Bloomberg Dollar Spot Index held near a seven-month high and the yuan touched an all-time low in offshore trading. Rising steel output and prices in China spurred gains in zinc and iron ore, while Japanese bonds advanced following an auction.

About 80 percent of S&P 500 Index members to have announced earnings so far exceeded analysts’ forecasts and that’s supporting investor sentiment as improving U.S. economic indicators bolster the case for the Federal Reserve to raise interest rates. American manufacturing is the strongest in a year and the euro area economy is expanding at the fastest pace of 2016, data showed Monday. Apple Inc., the world’s biggest company, is due to release results on Tuesday and second-ranked Alphabet Inc. reports Thursday.

“With the U.S. economy looking solid and a rate hike by year-end looming in investors’ minds, the yen is weakening, and boosting expectations for a recovery in earnings in the second half of the year,” said Toshihiko Matsuno, a senior strategist at SMBC Friend Securities Co. in Tokyo. Nidec’s earnings “reinforce the view that exporters’ earnings aren’t too bad.”

The outlook for U.S. interest rates may be influenced on Tuesday by American consumer confidence data and a speech by Fed Bank of Atlanta President Dennis Lockhart. European Central Bank President Mario Draghi is due to speak in Berlin and gauges of business sentiment in Germany and France are scheduled for release.

Stocks

The MSCI Asia Pacific Index added 0.3 percent as of 1:21 p.m. Tokyo time. Japan’s Topix index climbed to the highest since May and Australia’s S&P/ASX 200 Index rebounded from a one-week low.

Nidec, the world’s biggest maker of precision motors for hard-disk drives, surged more than 5 percent in Tokyo after reporting a 20 percent jump in quarterly net income. SK Hynix, a supplier of memory chips to Apple, gained the most in three weeks in Seoul following its results.

The Kospi slid 0.5 percent after the Korea Tourism Board said China is trying to suppress outbound tourism to South Korea. Hotel Shilla Co. sank 6 percent and cosmetics company AmorePacific Corp. tumbled about 9 percent as investors dumped shares of Korean companies that derive significant income from Chinese visitors, who accounted for about half of arrivals in September. Relations between the two nations have been strained by plans for a U.S. missile defense system to be deployed in South Korea.

Futures on the S&P 500 Index advanced 0.1 percent after the underlying benchmark climbed 0.5 percent on Monday. Analysts now predict third-quarter earnings for the index’s members will be flat year-on-year, better than projections for a 1.5 percent contraction a month ago.

Currencies

The Bloomberg Dollar Spot Index held close to a seven-month high after the chance of a Fed rate hike this year increased by three percentage points to 71 percent on Monday, according to pricing in federal funds futures contracts. The greenback advanced in the last session as a preliminary U.S. purchasing managers’ index rose and Fed Bank of Chicago President Charles Evans said it’s likely that interest rates will be hiked three times by the end of 2017. The pound and the yen fell 0.2 percent versus the greenback.“Evans probably had a stronger impact than the PMI on the strength of the dollar,” said Kyosuke Suzuki, head of currency and money-market sales at Societe Generale SA in Tokyo. “There aren’t many senior Fed officials who have come out with specific numbers of expected rate increases. That’s providing a tailwind for the dollar.”

Canada’s dollar weakened 0.4 percent, erasing most of the last session’s rebound from a seven-month low, after central bank Governor Stephen Poloz clarified earlier remarks that had curbed speculation interest rates will be cut. Poloz said he wasn’t referring to monetary policy when he told lawmakers that the best plan was “to wait for the next 18 months or so.”

The yuan held near a six-year low in Shanghai and reached a record 6.7885 per dollar in the offshore market, which began trading in 2010. The onshore exchange rate has declined in all but one session this month, a sign the central bank has reduced support since the yuan’s inclusion in the International Monetary Fund’s Special Drawing Rights on Oct. 1.

The won weakened 0.4 percent, weighed down by the spat with China and concern about exports. South Korea’s economy expanded 0.7 percent in the third quarter from the previous three months, when it gained 0.8 percent, data showed Tuesday. Net exports shaved 0.6 percentage point off gross domestic product.

Commodities

Zinc, used to galvanize steel, jumped as much as 4.8 percent to a five-year high on the Shanghai Futures Exchange and hot-rolled steel coil climbed to levels last seen in April. Iron ore surged to a two-month high on the Dalian Commodity Exchange.

“On the demand side, steel is a leading indicator,” said Helen Lau, an analyst at Argonaut Securities Asia Ltd. in Hong Kong. “While the property market is subject to cooling measures, the infrastructure side in China is still good and that supports overall demand.”

Crude oil slipped 0.1 percent to $50.48 a barrel in New York, after declining 0.7 percent on Monday after Iraq said it should be exempted from planned production cuts being orchestrated by the Organization of Petroleum Exporting Countries. The head of OPEC is set to visit Baghdad on Tuesday for talks aimed at resolving the matter.

Bonds

The yield on U.S. Treasuries due in a decade was steady at 1.76 percent, after climbing three basis points in the last session. It will have to rise if the Fed’s Evans proves correct with this prediction for three interest-rate increases by end-2017, according to Kim Youngsung, head of overseas investment at South Korea’s Government Employees Pension Service in Seoul.

After one increase “for sure” in December, two more in 2017 will send the 10-year yield past 2.5 percent, Kim said. Economists predict the benchmark will end next year at 2.14 percent, according to a Bloomberg survey with the most recent forecasts given the heaviest weightings.

Japan’s 20-year government bonds rose for a fourth day after demand strengthened at an auction of the securities on Tuesday. The yield fell to a three-week low of 0.36 percent. [Bloomberg]

FTSE 100 Outlook and Prediction

FTSE 100 Prediction
FTSE 100 Prediction

For today I am looking to “short the rallies” again, with an entry at the 7025 area for a short to target 6975 or lower. The 2 hour chart has gone bearish now with that drop yesterday and is showing that level as resistance so worth a go I feel. The bulls are trying to keep prices above 7000 as I write this, though the drop yesterday and also over the past few sessions shows that the bears are gaining a bit of strength. 6980 area is decent support (held alright yesterday once 7020 broke) and a break below this could well open the way to 6950 and lower, quite possibly sub 6900

32 Comments

  1. Morning.
    Well, got the bounce, Nick’s 25 is also ~50% retrace of yesterday’s range, so expect some resistance, how much we will see but looking fairly sprightly atm with a solid DAX in the background.
    Light scale up shorts for me, not particularly worried until we get in the 40’s.

    1. Morning all, I’m looking at a little step up short too, a little out at 25 and a limit at 35. Think I’d have a bit of a panic if it got to 50, looking for it to get down to 90 ish, I think!

      1. I’ve got to go out so sell limit off at 30, stop at 35 for the 25’s and limit buy back at 00. See you later.

  2. morning all.
    Short dax ave 10794. stop range 10812 – 10840 – may scale in more shorts before stops. Target 1 10780, Target 2 10755

  3. Seems FTSE strong today
    Meaning dow moved 10 points up ftse moves 10 points up…Dow dropped 15 points FTSE drops 5 points…

  4. Back now, didn’t miss much it seems. pulled the stop and put sell limits at 30 and 35. Pulled the buy back limit too. Lets see what happens on the street open.

  5. Yeah I thought it was building up for a pre dow push.
    Earnings season over there will make any correlation difficult. Nothing much in the way to stop us having another go at 60 really, maybe a pause in the mid 40’s which we’ve reached as I type.

    1. Good question.
      Nothing technically at 50 for me to say sell although I doubt if it’ll go up much further in a straight line.
      I’m sitting on hands after stopped at 32.

  6. A bit of a charge at 60/65 resistance, I’m looking for a break through short at around 75/80 by which time it should be pretty overextended. But the Bulls have it for the time being.

          1. It’s tough alright mate.
            Logic said to short the new high attempt but it was showing such momentum I was trying to be too clever.

            One thing is likely, we won’t close ~45.
            75 or 25 maybe, which who knows?

    1. Crazy rally, crazy drop.
      I’m still kicking myself for not shorting at least something in the 60’s…oh well, tomorrow’s another day.

      1. If I take a survey of 1 (me) then the rally started, spooked the bears, exacerbated the rally, sellers came in. Like you say, crazy but I think there are a lot of nerves out there. Big bank traders don’t want to drop a bollo* in case they are about to move out of London, Hedgies probably trying to be flat but still justify their earnings etc etc. Lesson 9million and 1, grow a pair!

  7. Bottom picking cable was a stressful afternoon I can tell you. The most annoying thing is that I took all the pain, then took profit waaaayyyyy to early – lesson 9million and 2, grow a bigger pair 🙂

  8. But you still took profit so good job 🙂

    I managed to catch it down, up and down a bit.

    Not posted too much recently as been mad at work. Ironically as I am less able to check I am winning more points. I am trying a method of entering a trade and then adding limit as target without me closing early due to needing a bigger pair !!!

    1. Yes, the ‘letting profits run’ bit is something I haven’t mastered yet – although my overall style of trading seems to be based around getting small numbers of points (5-20). I perhaps need to try setting some targets off the hourly chart rather than the 5m…

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