Support 5940 5919 5886 5871 5852 5843 Resistance 6016 6020 6062 6135

Good morning. Wow, what a day that was yesterday. The Dow opened up over a thousand points down, and was -1250 at one point – it was bearish history in the making. Was a volatile one though as it then rose a thousand points, more like gambling than trading when its like that. The morning was alright for us with the Dax and Gold trades working well but the FTSE order got stopped out. As with the others it was all over the place – not very often you see the FTSE at -500 for the day either. If you wanted to see what panic and fear looked like on the market, yesterday was it. Asia has bounced overnight as eyes will be looking to measures to stop the rout now – stimulus, not raising rates etc etc. Can see the Dow rising to 17250 before another dip down, maybe 16500?

US & Asia Overnight from Bloomberg
Asian stocks rose with U.S. index futures after a selloff that wiped $2.7 trillion from global equity markets on Monday. Oil climbed from six-year lows, while the yen retreated with government bonds.

Australian and Korean equities led gains through Asia, while Chinese shares dropped a fourth day. Futures on the Standard & Poor’s 500 Index rallied 2.2 percent after the U.S. benchmark entered a correction for the first time since 2011. The dollar strengthened versus major peers as 10-year Treasury yields rose for the first time in five days. Oil climbed 1.6 percent in New York after falling to $38.24 a barrel.

“Our bottom line is that the world’s still not a bad place,” said David McDonald, Sydney-based chief investment strategist for Australia at Credit Suisse Group AG’s wealth management and private banking unit. “Fundamentals aren’t as bad as the headlines would suggest. It’s just a case of whether you would want to rush in now or perhaps wait until it settles down a bit more.”

China’s decision to cut the value of the yuan two weeks ago has sent convulsions through global markets, sending all but the safest of assets tumbling amid speculation that the world’s second-largest economy is in more trouble than previously thought. The rout has driven gauges of volatility to multi-year highs and sent bond yields tumbling as investors wound back bets that the Federal Reserve will begin raising interest-rates as soon as next month.

Asia Rebound
The MSCI Asia Pacific Index rose 0.5 percent by 12:52 p.m. in Hong Kong, as the S&P/ASX 200 Index climbed 2.5 percent and the Kospi index added 1.2 percent in Seoul. Taiwan’s benchmark stock gauge jumped 3.3 percent, while Singapore’s advanced 1.8 percent.

Japan’s Topix index increased 0.4 percent, erasing a loss of as much as 4.7 percent, as the yen retreated. The currency weakened to 119.04 per dollar after surging 3 percent to 118.41 on Monday, the strongest since February.

U.S. futures signaled the first day of gains for the S&P 500 since Aug. 17. The U.S. benchmark dropped 3.9 percent to 1,893.21 at the close in New York, 11 percent below its May record. Contracts on the Dow Jones Industrial Average advanced 2.2 percent and those on the Nasdaq 100 Index increased 1.8 percent.

A gauge of options prices on U.S. equities surged as much as 90 percent Monday to touch the highest level since January 2009. The Chicago Board Options Exchange Volatility Index, or VIX, finished the day at 40.74, the highest close since October 2011.

Quake Levels
Measures of price swings retreated across Asia, with the Hang Seng Volatility Index sliding 1.1 percent and the Kospi 200 Volatility Index falling 2.2 percent. Both gauges hit almost four-year highs Monday.

Japan’s Nikkei Stock Average Volatility Index was little changed as stocks in Tokyo erased losses. The measure had earlier surged as much as 30 percent, at one point heading for its biggest-two day jump since the March 2011 earthquake, tsunami and nuclear disaster.

Chinese equities defied the rebound, with the Shanghai Composite sliding 4.3 percent and a gauge of Chinese companies in Hong Kong fluctuating. The Hang Seng Index, which entered a bear market Friday, climbed 1.6 percent.

The mainland’s benchmark equity index has lost almost 20 percent since Wednesday and is down 40 percent since peaking on June 12. Unprecedented efforts by the government to halt the rout have come to nothing, with the gauge erasing all gains since the beginning of rescue efforts before going on to wipe out 2015’s advance.

“It’s panic selling and it’s an issue of confidence,” said Wei Wei, an analyst at Huaxi Securities Co. in Shanghai. “It looks like investors have all lost their confidence so there’s still room for the market to go down further. The government won’t step in to rescue the market again as it’s a global sell-off and it’s spreading everywhere now. It’s not going to work this time.”

China’s central bank added the most funds to the financial system in open-market operations since February as currency-market intervention to prop up the yuan strained the supply of cash.

The offshore yuan rallied 0.4 percent in Hong Kong. The one-week interbank savings rate for offshore yuan jumped as much as 840 basis points to 22.9 percent, the highest in data going back to 2010. That compares with 3.3 percent at the start of the month. [Ref]

FTSE Outlook

FTSE 100 prediction
FTSE 100 prediction

Conditions for the brave at the moment and doesn’t make writing this very easy thats for sure! I wouldn’t be surprised if we have seen the very short term low for the moment, and the FTSE rises back above 6000 soon, before another leg down. As I write this at 6am the moving averages on the 10 and 30min charts are positive so we may continue the overnight bounce with some sharp pull backs along the way. At 9pm last night the FTSE was -100, its now +70 so its not really calming down much as yet. We will probably get a bear squeeze rally today. Not too much to say really apart from buckle up, buy the dips today I think when it goes down to the support levels mentioned below (members only) and lets see if the bulls can do anything today. The daily RSI(10) has ticked up a little bit from its lows as well, now printing 15 compared to 9 – if it can get through 30 then we will be less oversold.

123 Comments

    1. Morning icarus, brave man, I just jumped off the early bull train and was half contemplating doing the same.
      Not very convincing action, already lost its uptrend, better get through 40 quick to stop a top forming.

    1. Lol, chill out, you’ll be a nervous wreck by lunchtime 🙂

      Will 6042/9920 DAX hold?
      Is it the 09.15 dead cat or are we going to follow Nick’s arrows?

      1. I guess that counts as a breakthrough, does on the DAX anyway, let’s hop back on the train on a dip I suppose, but where? High 30’s? Could be back at 20 in a couple of ticks, decisions, decisions…..

        1. Getting a little bit overbought now, out a 64, look to buy 40’s uptrend I suppose, go with the flow,as they say.

          1. Right, so the same question again, new highs or top?
            The arrows say down to 5980, not sure about that, but 60+ feels plenty far enough for the time being, already failed a retest at 56, needs to have another go asap.
            Plenty of sellers waiting for signs of weakness, I’d think. Like me.

        1. Hey Nick do you deliberately chose the most asinine industry comments for your post? 🙂
          “Our bottom line is that the world’s still not a bad place”
          from some CS a/c exec. No it’s not I suppose, when you’re on $5m a year for talking b*ll*cks.

  7. 100 point rally in an hour, lol, amazing what you get used to.
    Trying to hang on to 31% rt in low 30’s, if not then 6020 should hold really or it’s arrow time.

          1. Highly overbought short term attempt on 65.
            That formation, straight up then 45 degree continuation with no significant pullback can be very bullish, I always tag it as possible intervention buying because it looks contrived and unnatural.

          2. And cleanly through on the third attempt, DAX is dragging its heels.
            Keep buying those pullbacks, I guess.

  10. While it’s deciding what to do, I was interested to read yesterday dietcoke saying he was naturally bullish, and finds it difficult to short.
    I am the other way round. There’s been quite a bit written about the psychology of trading and the influence of our personalities on the way in which we interpret data.
    Generally, I’d say that bullishness indicates a positive, more conventional person, whereas bears tend to be more cynical and possibly anti establishment (which seems to be the authorities attitude sometimes, when shorting is outlawed).

    What do you think, are you naturally a bull or a bear, or can you honestly say that you only trade logically and unemotionally?

  11. I used to be comfortable only with shorts. While that has faded away over time I still feel the itch sometimes. So I think I trade what I see most of the time but the bear takes over on a few occasions.

  12. Hi tmfp,

    I’m a bear thats why I haven’t done well over the past few years!, we might get a few months of bear action now for us, short 30 but trying to be careful as I think 6100 is on the cards

    1. Also Mahoney at IG has 6070 as a big deal, so quite an important zone here.
      Not much help from DAX, actually making lower highs and lows.
      Too many people expecting upside for my taste, but would need maybe 50 point stop to comfortably short around here.

    2. 6123 –
      6123 is the Friday > Monday Hi of the Gap (6027 the Open).

      I’m still trying to make sense of these PRT lines –
      Maybe I’m over thinking them a little.
      Does anyone have any experience using them ?
      From what I’m looking at, 1 Min Chart you would have been Long 6042 Tgt 6182
      (Alternative Position – Close below 6048.8 (S) – Tgt 6026)
      (Also – The Long position would have been entered much earlier this morning at about 6000 but these lines have now disappeared. )

      1. The 10 Min Chart reveals a little bit more with the uptrend & downtrend
        lines intersecting here at 6070 – although it is further out in time to 3:40 pm (the cross). The immediate resistance at this moment is 6095.

        1. (Alternative Position – Close below 6048.8 (S) – Tgt 6026)
          Game on…let’s see if 6026 is hit.

    1. Yeah, and if the DAX can get back over 10000 then that’s an inverse H&S confirmed and that could motor along too.
      All ifs and buts though, not impressive right now, DAX 3 lower highs/lows.
      I’ll give FTSE a long low 6050’s I think.

          5. DAX is on a roll, 6110 seems enough for us temp, but basically all we’ve done for the last 3 hours is make new highs.
            Short at 6105 10 either way

          7. Those 6117/10113 highs were what I call soft highs, they sort of appear as an afterthought to the original move.
            Can be a bear signal, already led to a lower low on DAX and will put pressure on 90 FTSE probably.

          8. 45 has held all morning on the 5min 10 rsi, currently ~53, so another test should price at about 6070, worth a buy imo.

            1. Typical eh. Was watching 6123 for the short (missed by 5) and then 6070 for the long (also missed by 5)

          11. That 12.27 6104/10070 high was just a bit overbought and should be quickly reclaimed if it’s got any momentum left in it , or we’re back down to 80 again.

          13. That trendline is now high 80’s custard. I would have liked the 3 confirms, rsi, trend and prev resistance for a confident long at these sort of levels.
            We are over 200 up this morning after all.
            Neutral is wise, if boring atm. Wake me up at 6108 or 6085. 🙂

  15. tmfp
    a good question and statement you have made in reference to natural predisposition!
    yes we are born with preferences – right hand or left hand, but most of it is learnt and the environment plays the most impt role
    i rarely read nicks comments and arrows until i have finished trading, it has a very detrimental effect on me as nick is an expert on tech analysis but it is only one mans version of what may be possible and the accuracy is well below 50% ( sorry nick for bringing this up – it is only in ref to this posting). what i used to do was find clues in nicks analysis to see why it turned, but turn it will – not because of a raff or bianca or channel ( we can curve-fit this – as I have done for years) . jack-2 comments regarding the arrows – was a case in point
    tmfp – your short preference and copious notes regarding this had an effect on my thinking, especially in reference to ” what profits would be realized”
    i try very hard to just read price action, and not take sides, am i successful – hell no but the market influence on my thinking is probably the ONLY influence i truly want, and in this regard i need a lot more of this, so i keep trying

    1. You got me right, Paul. That’s exactly my point. I love reading Nick’s review and arrows in the morning and it does get an impact on my actions. I get more inclined to something what is about to happen and start ignoring the strategy signs: like impulses, channels, indicators. For instance yesterday my long preference came out of an imminent long which was about to happen according to Nick’s arrows. And it did happen, but (big “but”): at first it decided to drop 600 points in order to completely wipe me out which I couldn’t have imagined would ever happen. We all learn, it may happen, and you need to use your stops etc. etc.
      I know it’s just me who needs Nick’s advice and maybe those arrows sometimes to get my head round, but I try hard to avoid it, but can’t help it. The top message on my strategy – don’t read Nick’s comments and comments of other people, but I still do.

      1. But on the other hand if it wasn’t for Nick, I wouldn’t be trading now at all. He taught me a lot.

      2. Exactly – Its just my thoughts and opinions. You use it in conjunction with your own analysis, thoughts and opinions!

  16. Not getting any signals today. Looks like a bit of a damp squib at the moment. Took 30 points on the rise from 6030 to 6060 but staying clear for a bit, don’t like the look of it.

  17. Some of these ‘journalists’ need shooting:
    The Telegraph tells how the Athex Composite dropped 10.54% then rallied 5.31%. The headline “Greece is Europe’s big winner.”
    ffs.

    1. I always laugh at how the news is bent to fit what the markets have done too. Saw one Bloomberg headline change from negative to positive to negative in the space of an hour on one story (probably NFP or something).

  21. Still expecting support at prev resistance 10000/6064-70, and nothing really broke on the upside until 6040/9900 get threatened.

  25. Looks like strong support at 6060, bounced off it twice now, would expect some decent downside if it is broken though

    anyone thinking the same?

  33. Lol, just a punt at another try at 80+, I think the DAX will make new highs soon too and drag us up, then the Yanks will have something to live up to.
    I have been saying this area 60/70, is support for me for a while now, even though it did overshoot a bit..

      1. I got a signal at 58, so have joined you on that long mate. Can’t see it being more than 20 or so points though

  38. Long sides not dead yet We held 40 ok if DOW can hold 150 I think we have a bit of upside, long 50 stop 35

    1. nice 🙂
      Can you tell it to go up now pls ?
      A bit of DOW upside say 220+ and the FTSE will fly I think

    1. Hey Pete, why don’t you ask me sometimes when you’re running a profit? Cos I’d have said take it out at 40 😉
      It could well go down mate, you’re in the hands of the US now, nearly breaking even (short at 60?), I’d take some of it out around b/e if you’re not sure any more.

  49. Tks for that tmfp, I took short 00, any target, I keep thinking this is going to drop, god I hate been a bear

  50. Yea taking profit is another problem I have, somebody I know told me earlier to take profit @28, but there you go

  52. V good ftsewhoopsie, if I can get a clearance I’m going to put my stop @60 & see what happens after that, at least I’ll make something on the one from 00, tks to tmfp

  53. Became super bearish yesterday around 3.30 with that weak Dow and thought my plan was playing out. Really can’t see State of China buying putting 300 on to Dow futures. Let’s see how the cash market reacts. I fancy new lows

Comments are closed.