Cautiously bullish for today, rise 5780?

Support 5684 5670 5660 5630 5620 5608
Resistance 5695 5747 5771 5800 5833 5901

Good morning.
Market Summary for Monday
Another day of big negative moves with the FT100 dropping by 2.7%. Initially it appeared there may be a bounce from Friday’s close as the FT100 moved at the open above 5850 however worries about the banking system soon drove prices downwards for most of the day. Finishing below 5700 this is over 1300 points down from the summer peak! The worst performing sector was financials with commodity shares surprisingly strong. Out of hours the FTSE managed to climb to 5735 however its again dropped off from there (hitting the 25ema on the 30min chart as resistance).

US & Asia Overnight from Bloomberg
The global stocks rout intensified with equities in Tokyo sliding the most since August and index futures indicating U.S. stocks will add to declines that sent the Standard & Poor’s 500 Index to a 22-month low. The yen reached its strongest since 2014 and corporate bond risk climbed.

Stock gauges in Japan and Australia slumped and U.S. index futuresslid at least 0.8 percent. Markets from China to South Korea remained closed for Lunar New Year holidays. Evidence of mounting distress in global credit markets boosted government debt, with yields 10-year Japanese bonds tumbling as much as 5 basis points to below zero and Treasuries heading for their best start to a year since 1988. Gold was on track for its longest rally since 2011 as the yen surpassed 115 per dollar. Oil traded at about $30 a barrel.

“Investors had probably thought yesterday we might have hit bottom but they’ve been crushed,” said Nobuyuki Fujimoto, a senior market analyst at SBI Securities Co. in Tokyo.
“Greece, Deutsche Bank, shale gas — all we hear is bad news. Investors must have their heads in their hands right now.”

Traders have unwound bets for the Federal Reserve to raise interest rates this year as concern intensified over China’s capacity to deal with its slowing economy, and the impact of Japan’s imposition of negative interest rates. The distress that has brought global equities to the brink of a bear market in 2016 is flaring in the credit space, with the cost of protecting against company defaults worldwide surging. Deutsche Bank AG shares and debt slumped Monday amid questions over the lender’s ability to pay coupons on its riskiest bonds.

Markets in mainland China, Hong Kong, South Korea, Malaysia, Singapore and Taiwan are closed for the New Year holiday Tuesday.

Stocks
Japan’s Topix index tumbled 5.5 percent in Tokyo, falling the most since Aug. 24 as banks and financial shares led losses. The Nikkei 225 Stock Average dropped 5.4 percent, its biggest decline since June 2013.

“The yen is rising while U.S. Treasury yields are falling and gold prices are rising. Basically it’s showing a risk-averse market sentiment,” Toshihiko Matsuno, chief strategist at SMBC Friend Securities Co. in Tokyo, said by phone. “With increased concerns of a slowdown in inflation in the U.S. as well, market sentiment is being shaken.”

Energy and banking shares led Australia’s S&P/ASX 200 Index down 2.9 percent. The S&P/NZX 50 Index in Wellington lost 1.3 percent in its first day of trading this week.

MSCI’s All-Country World Index fell 0.4 percent, leaving it down 19 percent from a peak reached in May. Most investors regard a 20 percent retreat from a peak as the definition of a bear market.

Futures on the Standard & Poor’s 500 Index declined 0.9 percent with those on the Dow Jones Industrial Average and contracts on the Nasdaq 100 Index.

Equity losses took hold in Europe on Monday, with banks driving the Stoxx Europe 600 Index to its lowest since October 2014. Deutsche Bank tumbled 9.5 percent as analysts at CreditSights Inc. said it may struggle to pay coupons on its riskiest bonds next year should operating results disappoint or the cost of litigation be higher than expected. The lender said it has sufficient capacity this year and next.

While paring declines in the last hour of trading, the S&P 500 still ended Monday down 1.4 percent. The Nasdaq Composite Index neared a bear market as some of the biggest tech stocks dropped, bringing the gauge’s decline from a July record to 18 percent. [Bloomberg]

FTSE Outlook and Prediction

FTSE 100 Prediction
FTSE 100 Prediction

Yesterday started off looking bullish but the picture soon reversed and we got some pretty massive drops globally. No real reason apart from general fear/panic that everything is screwed! It was mentioned that the Vitol CEO’s negative comments played a part but I feel that was the news trying to fit to the price action rather than the cause. With China closed this week for their Lunar New Year it was eyes on Japan overnight, who shed 5%, to scupper the out of hours rise on the FTSE to 5735. Despite all that we know how fickle the market is so I think we might see a bit of a rise today, if the 5660 area holds as initial support. If not then the next support area is 5630 and I have plotted that with the pink arrows on the chart (blue is preferred, pink is plan B). A rise to the pivot at 5747 is what I am thinking, mainly as we are testing various daily channel areas round here as you can see from the levels to watch section below. If we break 5630 however, then I am fully expecting 5400 before too long, especially with oil remaining below $30. So, cautiously optimistic for today!

59 Comments

  1. Morning All, Well that last half an hour on the Dow was quite funny, 200 point rally! Situation report – I’ve got a reasonable collection of FTSE, albeit with a shining example of going to early having the first lot at 5850. Average currently around 65 points away from b/e. Am looking for 5850 to let them go. Still got some Barclays and to be fair they were looking pretty sick yesterday too. So, GG33, I’ve tried to pin the tail on the donkey and probably missed. Good luck today.

  2. morning chippy
    looks like you may be okay if we can break and hold 5740 in the next hour or so. yep heck of a rally in dow last night. It defended that 5660 level very strongly so I might have to tone down my impulse to sell as mid week Tues-Thur is when we get tend to get a bounce and if it gets going there’s a lot of daylight past 5771 up to 5900ish. GL my friend

  3. Morning chaps,looks like it’s another Day riding the Big Dipper! I don’t know about you guys but it gives me indigestion! anyway good luck chippy with the longs…..if you have the 8alls, i think you will be ok but I wouldn’t count out the possibility of sub 8900 Dax and sub 15900 Dow on the way again…..Argyle…..you still holding that long from 682 ?

    1. tmfp…..if you look in today I hope you are feeling better ……..I have only done a handful of Days with 30 plus trades and I found it totally exhausting and was completely knackered afterwards……..to do what you have been doing everyday takes an enormous amount of concentration and stamina to maintain…….Enjoy your motorbikes for a while……take it easy…….all the best and stay well buddy.

  5. Morning all,bit of bad news was good with the German trade/prod no’s around their open,quite nostalgic,shorted it anyway,which was against my indicators,last 3 times I’ve done that it cost me money and I still havent learnt that lesson and an in profit S/l wont help me to,so taking the day off from trading,fwiw on the 15 min Dax that looks like a Pennant forming,which is a continuation pattern and implies a re test of the low 8900’s before we see the mid 9000’s again.Have a good day everyone.

    1. Thanks WSF my thoughts exactly re the Dax I’m thinking a retest of 8900 on the Dax before further rises. Have a great Day away from trading WSF………all the best.

      1. Hey thanks WSF….I’m just looking at the 15 min Dax……..I can see that pennant you mention….The funny thing is my view of a Dip to 8900 is based on my feel for the price action I’m seeing….a sort of a feel for it…..but your technical analysis re the penant is suggesting the same thing…….how very interesting….let’s see how it plays out?

  6. Hello chaps, thanks for the thoughts, I’m totally fine.
    As I said, I enjoy the chat but tbh it was becoming a distraction, especially as I try to transition from just scalping into scalping and day long trades.
    Due to my advancing years holding concentration isn’t easy, and I needed all my marbles to sell the arse off that Friday and yesterday. 🙂
    In the new spirit of disclosure 😉 at one point yesterday I had my largest ever cumulative open position, £120 pp short, so very happy bunny atm.

    FWIW, I’m still in default sell the rallies mode, can’t see any reason not to be really.
    The difficult bit, of course, is judging when a rally has run out of steam and I’m still relying on my good old rsi in different time frames for scale up shorts, as I am to take profit when it gets oversold.
    Good luck all, catch you soon.

      1. Just my thoughts tmfp, the oil price, just be careful.if anything should be announced regarding cutting supply this lot could fly up and at £120 pp even a 15 pt stop is £1800…….I know you will be covering yourself and I’m probably talking a load of rubbish but you never know…. I really think the oil is the key to a rally.

      1. Thanks anstel, I will! Looks like I may have these for a while, might have to re name my self as an “Investment Trust”.

        1. It’s really hard,I know how you feel I’ve been there a few times it’s a matter of trying to hang on sometimes………..you always have the option of hedging part of your position to temporarily break the battle into smaller parts…and it can give you a psychological breather as well. Dangerous but it’s an option.Good Luck….fortune favours the brave……I hope!

          1. We’ll see anstel. Hedging – talked about this before – no such thing as a perfect hedge, you either cut the position and get back in again or run it. The only “hedge” I’d use is out of money options from the start but I haven’t! Anyway, we could get a lower low later which will cause some excitement but I’m nearly fully loaded so on a watching brief.

          2. All I can say chippy is hedging has worked for me on many occasions……However you play it,very best of luck.

  8. WSF was on the money earlier when he mentioned the pennant formation on the 15 min Dax earlier suggesting a dip down sub 8900. That’s a new pattern I have partially learnt!

  11. Is there any chance of some sort of long after US open today? on Dax? What do you think?
    I hope 9818 breaks

    1. I don’t know Jack,I expected it to drop below 8900 but I didn’t think it would drop this much…….All the Dax has done recently is steadily decline but with occasional trips above 9000 apart from Monday open when from memory it hit the 9300 area.If I was to make a Guess….I would say a small long……..

      2. I guess, no point to risk. It’s like when you think it’s gone too far now, it’s time for reverse, but the price doesn’t think so. This is the same when the majority of people tried to short the tops. But glad I had some 30 half/points today (Half points meant I risked only half of my stake because the rank of the trade considered to be risky: against the trend, so half stake.) At least got profit since yesterday’s b/e.
        When it’s high probability trade: trades after retraces along the trend: full stake.

        1. I suppose it all depends on what the Dow does next? Ydays low was from memory….I might be wrong ,but I think it was the 15808 area… Hope it goes up …….chippy could use a rally right now.

          1. Oh, I was switched off, didn’t see US open. But that long 8775 yes, maybe a good possibility but was done with downtrust, all stops would be out since 1.50 and my stop was 777 and it’s like picking the bottom. But it’s going up as expected.

      1. Let’s hope it keeps going for him…..I’m sure he posted he needs 5850 or so…….I think 5700 would be a good target for tday….maybe 5750 if we get a strong rally from the Dow?

        1. I would have closed, if the trade was -60 on FTSE what is the hope? Where it will get? It’s a counter trend here.

          1. It’s hard to know really Jack…..we seem to be getting 100 point fluxuations very regularly…….it only needs two 100 pt rally’s and he’s right back in the game.just have to see how it plays out, we can’t control the market we can only control our reaction to it.

          4. Anyway it’s Pancake Tuesday………start off with a plain pancake with lemon juice and sugar…….then I might try one with maple syrup :0)

    1. Just got back in and on line – glad I missed that lot! Anyway, you can’t discount from NAV when NAV appears to be nearing zero!!
      The 5850 was first entry, I’m in at around 5770 for the lot so I’d like to see 5850 for £££. Got a little bit of spare ammo saved up in case we get to tmfp’s dream (5200).
      It seems 5600 has been defended fairly well, but I’ve said that before! Hope you are all doing ok.

        1. Let’s think positive hey,,,,,we are only 350 points of 6000. That’s 3.5 Ftse rallies…….of 100 pts each……How that for an optimistic outlook :0) that’s 230 pts x position size…nice little earner ..It’s much nicer thinking positive :0)

      2. Oh, I thought we were talking about 5650 to get to b/e. So you didn’t get out at this point and still holding a loss. Oh dear.

        1. Oh dear indeed Jack! Patience is a virtue or maybe a quick method for me to chuck away a load of wedge. Anyway, looking on the bright side, Dow is within a spit of 16,000 and FTSE has had a few unsuccessful go’s at 5600. Been here before (was around 250 points offside before the Santa rally!) will probably be here again and one of them will definitely bit me on the arse!

          1. You will be fine chippy. Just don’t add to bring your average b/e lower. Sit, wait and be patient.

          2. Yes, I think you’ll be all right on this one, fingers crossed. I see a green line 5577, hope it will not drop any further. GL

        2. Thanks chaps, pleased to know you are rooting for me! Had 3 of these plays last year, the well documented Santa rally palaver, August and a nasty bear squeeze earlier in the year. Whilst i might like to make it sound that I’m a bit laissez faire I do have strict rules on how much of my pot I use and when I say “fully invested” I’m talking about a stake of just less than 2%. That amount can pretty soon get nasty but keeps me afloat!
          Anyway, fingers crossed the 8.45pm Dow rally charges it over 16,000 again and I can start seeing come back! Off to the pub for a sharpener now, cheers

          2. Just re read that, for information, the bear squeeze one went wrong! Funny, really, I wish I had those shorts now.

  15. Evening gents, looks like chippy’s totally legit 200 pt DOW rally came a little early today. Puts things back in the sell zone, so can’t complain I suppose.
    Had a good day?

    1. Hi tmfp, yep, magic day! Seriously, though, cocked up by going too early so the 5850 lot was a mistake, the rest as per the plan I mentioned the other day.
      It’ll be no surprise that I’m looking pretty sick with Barclays position but they are for the long run.
      I reckon you’ve had a bit of a result over this week so far, probably got this months money and made a fair dent in March!
      Good luck fella and keep us in touch

      1. Not sure that the short side’s over just yet though mate.
        Up till now, selling’s been mainly voluntary and buyers have been scarce (your good self excluded).
        It’s when selling is forced and buyers vanish completely, that’s when it gets hairy, and I don’t think we’ve reached that point yet.

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