Support 5971 5942 5817 Resistance 6062 6112 6180 6222

Good morning. I was a bit early with the SMS to get long yesterday morning but well done those that re-entered on the bounce as it climbed as expected, hitting 6118 at the high. However, the volatility continued after the bell with an overnight drop to 5900 and is now back at 6060! Wild times and not a period to lose you head or risk your shirt. No harm in sitting on the sidelines like this if you are not able to fully focus! With these bounces I am still pretty positive overall, and see dips on shares and indices as good buying opportunities. I don’t think we will see interest rate rises soon, and the latest consensus for the UK rate rises has been pushed back to October 2016. This is quite a good article from Neil Woodford here

US & Asia Overnight from Bloomberg
Asian stocks rose, with Japanese shares rebounding from the biggest two-day plunge since 2011, as investors awaited the opening of mainland Chinese markets following Tuesday’s cut in interest rates.

The MSCI Asia Pacific Index advanced 0.7 percent to 125.75 as of 9:07 a.m. in Tokyo, after capping an eighth straight decline Tuesday to enter a bear market. Futures on the Standard & Poor’s 500 Index retreated 0.9 percent.

After the Shanghai Composite Index fell 7.6 percent Tuesday to cap a 22 percent, four-day plunge, China’s policy makers cut interest rates for the fifth time since November and lowered the amount of cash banks must set aside. While Chinese equity-index futures surged, with contracts on the FTSE China A50 Index jumping 4.9 percent, exchange-traded funds tracking the nation’s shares almost erased rallies in New York.

“China continues to be key,” Komal Sri-Kumar, the Santa Monica, California-based founder and president of Sri-Kumar Global Strategies Inc., told Bloomberg TV. “The authorities have not been intervening, they’ve been allowing stocks to go down in price. Assuming that continues to be the case on Wednesday, I do see a continued fall in prices.”

Japan’s Topix index rose 1.5 percent. Australia’s S&P/ASX 200 Index declined 0.7 percent and South Korea’s Kospi index retreated 0.2 percent. New Zealand’s NZX 50 Index added 0.2 percent.

Volume soared and swings on the regional Asia Pacific equity gauge broadened to the widest since March 2011 on Tuesday. The global share rout has wiped more than $8 trillion from investors since China’s unexpected devaluation of the yuan on Aug. 11. [Bloomberg]

FTSE Outlook

FTSE 100 Prediction
FTSE 100 Prediction

Its a wild week for trading thats for sure, though its bounced once again overnight and I think we will see the same again today as yesterday. Yes there is a lot of doom and gloom around, yes there is a weakening backdrop (but its been weak for ages), but equally the market is oversold still, as the daily RSI(10) is still below 30, though risen now to 29 from 15 yesterday and 9 on Monday. So there is a bit of strength around. If the bulls can hold above 6000 then we should see a retest of 6100, and the 200ema at 6112, and then possibly the top of the 10 day Bianca at 6222. We are just testing the top of the 10 day Raff at 6060 so we might well get a dip at around the open, which would take us down to the 25ema on the 30min at 6000 which looks like a decent spot for a long entry, with the bottom of the 20 day Bianca at 5942 below that.

202 Comments

  1. Not getting any clear signals so my plan would be to short any intermediate highs or stay aside.
    Any thoughts anyone?

    2. As Nick says, if in doubt, stay out, this is brutal.
      I turned everything off last night at 20.00 knackered. It was pretty quiet, FTSE around 6050.
      Came back on line this morning 06.15, 6055 on FTSE, thought Oh a quiet night for a change, then saw we’d been down to 5900 and back up again in the meantime!!

      Got a little long which I’m debating about dumping now (6004), we are making hard work of clearing this area despite strong DAX
      Edit:
      cleared it while typing, posting on here makes money! Lol. Will hang on to it for a while stop 5990.

      1. Yeah, I had a pretty eventful night too. Lost about 30% of my account last night on some overconfident trades and made it all back……TWICE!!

  2. Morning Icarus,

    Was stopped out this morning @6030 for 40points from my short from yesterday (gutted as it was up 170points overnight) also took 30points on a short on the open, just waiting on the 70-80 area to short again, I think it will close the gap from yesterday, but who knows

    1. Morning Pete. I personally do not keep any positions overnight unless it’s a long term trade

      1. Yea I was planning on keeping it as a bit of a long term but like tmfp said whats a dip! I was looking for 300 points on my long term, but that could be a day trade

  3. Hi tmfp,

    If it clears 25 fair chance it will make 70, 25 was support twice yesterday, just my take on it, I think the US will rally a bit this afternoon before the big drop, although its nerve wrecking stuff, yesterday evening it was like a yo yo before it dropped

    1. If you say so Pete lol, I have no idea tbh!
      Looks like a buy the dip strategy would work, but define a dip??
      20 points?
      50?
      200?

      🙂

  4. Ha ha, not thinking of a long unless it breaks yesterdays high just sitting on my hands at min, kind of glad to take a break

  7. I got a bullish divergence signal at the lows on Monday. That signals q corrective rally. And if my wave counting is right, it ended with a 3rd wave failure and yesterdays high. Only getting bearish signals now so atm I think retest of Monday’s lows. that was my reason for the Dow short yesterday.If it breaks yesterdays highthen yes the short term bias could be towards longs with a peak around 6400 on ftse(if it has legs)

  9. Hi Icarus,

    Your following Elliots wave, I have been looking at it over the past few days, not sure what to make of it through, does anybody else give it any relevance, its predicting the 5500 area as the next leg, if yesterdays high is not broken

    1. we are on on wave5 which started yest low at 9pm close
      mon low to mon high at 6pm wave 1
      w-2 to low at 8.30 mon
      w-3 to high yest
      corrective wave to yest low
      w-5 longest wave so expect to break yest high

      1. That failed rally on the Dow yesterday is huge in my eyes. We have not hit a bottom. Good that everyone has different views to consider

  10. Paul, I use Elliot waves only to get a sense of where the market is. I use it in conjunction with divergences and support/ resistance levels. Elliot wave like other indicators will give you the answers you want to hear based on the timeframe you are looking at. Look at the 5min and its favoring shorts. Look at 1 hr its signalling wave 2 of correction.
    as such

  11. The market is in a downtrend and I would rather short 6400 than go long now. I see q meaningful bottom around 5740

    1. whichever way you look at it yesterdays low at 9.pm is key
      either we are in wave 5 higher or wave 3 higher
      obviously w-3 will lead to a move well above 6200

    1. Totally agree; China A50 4hrs is back down close to min; ROC has barely recovered to zero and looks likely to reverse; my Heikin-Ashi indicator in this timeframe says sell; a further drop of 500-1000 pts looks probable. Most worrying, PBC seems unable to get a grip.

        1. durable goods at 1.30 so we could get to 6100 by then
          possibe this is only a w-3 which means 6200

          2. dow breakout at just over 16200 which it should do
            reckon that points that more to this being w-3

    1. Hi hugh,

      Are you getting Sell signals on the DOW as well? Don’t know if i’m brave enough for that at the moment!

        1. Fair enough mate, took a good profit on the CAC last few days using your TRIO (unedited).

          You still going short at 65ish?

      1. Still here ..but really need to go out !
        I think that was a “fail” at 6061 area – need to see 6048 to break …
        That’s the plan…anyhow …
        Really going to try and leave now ….LoL

        1. Back now – closed at 55 where the trend line break occurred & pleased I did – looks like we’re heading >6090 area

  26. I think a significant break (10-15 points) either side of 6055 will signal the theme for the next hour or so, otherwise we might just be coasting to DOW open.

    Just my thoughts anyway

  27. Afternoon all, was having a think yesterday and have a lunchtime question for you all. I’ve read and heard winning spread bettors use the strategy of adding to winning positions but at what point would you implement this. Are there any cues that one looks for when deciding to add to the position? Answers on a postcard…. Or here please.

  30. Afternoon all,

    Thank-you to Nick again for another great overview.
    Reading the thread that I don’t think there will be any significant moves until China has given some solid news. Cheap money hasn’t worked, so I think it could be pretty range bound for the rest of the week. Keeping an eye on any major news coming out though will give a hint of any move sooner.

    To Coombsy, I would say that is a high risk strategy, I haven’t personally seen that anywhere. Volatile times like this I take as much risk out as I can. As I’m sure many do. I’m not one for talking profits, but my strategy this week is move on the bottom and tops only. It is frustrating playing the waiting game but gives more time for analysis and has worked for me this week only having one losing trade of a very small margin. So far since Monday, I can say I have cleared an average monthly 9-5 wage. Moving on the bounces and only putting in 3-5 trades a day, almost guarantees a sizeable return for me.

    But I am no pro, so please don’t take what I do as any kind of pro info! Just a fellow trader sharing my winning strategy this week!

    Regards,
    John

    1. jack
      adding to a winning trade is very difficult. it took me 2 years to get round it.
      think about it this way – for it to go higher – it has to break the last high and so forth. so you add at the breakout area. easily seen and if correct it is 100% correct.
      adding on a retracement – is difficult as you dont know where it is and also it actually denotes a failure till it has broken last high.
      easy said. difficult to acheive

      1. ah, okay, so where I am place my trades a the bottom or top, when it breaks out I add to my original trade. I do do this on occasions, but like I said, I try to minimise my risk completely. But thank-you, potential to increase profits.
        Agreed though, easier said than done!

  32. well thats me in at 6070 – now moved all stops to 35 and looking for this wave to take us to 6100 & possibly higher on w3

  33. Long at 63 looking for 30 points before taking half and seeing what happens with the rest.

  34. US Durable Goods Orders (MoM) (Jul): 2.0% (est -0.4%; prev rev 4.1%)
    -Durables Ex-Transportation (MoM) (Jul): 0.6% (est 0.3%; prev rev 1.0%)

    1. After the rises start the news flow changes from negative to positive…. is this the first one to start 2 weeks worth of more positive news. 17250 Dow/6500 FTSE/10500 Dax coming?

  37. still waiting with my order at 6099 for going long
    but have move my stop to 6055 market could do a move down to 65

        1. out at 58 on lots
          good but not as clever as nick & whoppsie
          never mind ..he says holding his tail

          2. You’ve had some great calls today Paul mate, how many points you up for the day? your first was at 6000 wasn’t it? with 3 more up to 50, must’ve cleaned up even if you were out at 58.

            Mine’s primarily hit and hope at the moment ha!

      2. I don’t really understand why you didn’t come out at 14.30 before US? This is the time when normally people trying to cut out on their positions as reversals happen and other stuff which happened the other day. Correct exits are also important.

      1. yes i know
        it was made easier by the deep low that formed
        all cycles could be reset
        not sure whether you remember RC , he gave me some help with this

          1. do you know where he is?
            are you in contact with him at the subscription site, not seen him here

    2. this corrective b could get as high as 6068 and fail
      but ideally should start c at below 52
      and end before 5982

  39. Gutted I closed my 85 short for +5, ah well thats the way it goes, short again 43 but looks like it will take me out b/e

  40. jack
    trading is random, until you can put a pattern to it
    unfortunately this is not written in stone

  44. Good calls paul. been away in meetings most day. If 850 holds I think we go up from here. Need a wee bit lower to go long.
    out of interest, which timeframe are you using for wave counts.

    2. find it difficult with small timeframes
      as really using one is trying to pick bottoms & tops
      dont go below 5 mins – better with 10 / 15
      but allow cycle to start and show otherwise you will
      not know the cycle
      wish RC was here, he was bloody good at it, not
      sure if you have heard of him

      1. Paul – Indeed RCs calls were excellent. Kept in touch with him for a while. His software was working well so I think it was just a case of following it as much as possible. It was Nirvana Systems OmniTrader – and the plugin was called MoneyZone. Link Here
        http://www.omnitrader.com/index.aspx
        Sounded like a great bit of s/w but you had to put the money up for the s/w and also the feed for it and also tweek it a little bit which is what RC had done.
        He probably still comes on here now & again ..come on RC – let us know how you’re doing !

      1. OK Dax I think – Just follow your stops up…
        RSI Trio Here as well but don’t normally do it on the DAX 16176-78

    1. Hugh I get the resistance at 380 but it’s close, I think as Nick said, we would start to hear some positive news. Risking some profit for a more? Definitely.

  64. I feel a real idiot (this is not sympathy but a cathartic rant ). After losing a bit 2 weeks ago I stopped. On thursday I guessed it would drop Friday but closed my shorts and made nothing, due to lack of courage. I screwed up buying low overnight on Sunday and lost £4! I spent all day trying to buy low on the dow, and closed out a 15800, and 16050 at next to nothing before losing on a 16950 short and then holding a 16195 to 16274 to ultimately make £12. I expected a rise today as the china drop was too low, and there was nothing to make it drop further but wasn’t able to hold my positions.

    Ultimately I realise I have no clue. Yes falling knives stay out of it, but I still feel I missed out when you guys seem to make money.

    1. Feel exactly the same milka.

      From time to time I seem to go through phases where I change nothing but every trade I make seems to send things in the wrong direction and I find myself stumbling along behind the bandwagon throwing money at it.

      Biggest thing I’ve learnt is never trade out of anger, if you’ve lost a bit, look at why, don’t go chasing to get it back somewhere else. And if everything seems to be going wrong, maybe it is, leave it for a few days and come back.

      I think it was Nathan Michaud on his tweeter feed talks about him and the markets getting annoyed with each other and a long weekend being best for the relationship. Easy to say when you’re clearing 5 figures a day though I guess.

    2. Guys – IMO These markets are challenging at the moment. They are unpredictable in both directions. The amount of time that you need to spend understanding “the moves” – make them – time consuming. It’s not easy.
      I did 7 trades today – 1 B/e – 2 Losers – and 4 Gainers but small. Was it worth it? Only just and when I consider the amount of time spent and the agro .
      I’d Buy – it would Go Lower –
      I’d Sell it – it would go Higher (Long would be in profit)
      I’d Buy it – it would head lower.
      Get the picture ! Finally Sell the bounces. Finally worked.
      I trade off the charts
      Put the Fibs up on a range and look at going in at 61/78 S or 23/38 L
      – i.e. I put the orders in on the chart – just leave the line (i.e don’t complete the order) and see how you go until you get a feel for the moves.
      It does require some patience – as you may not get filled.
      But what’s more important is that you get a better feel for the moves rather than the bias that your the last trade entry can have…
      Just my two pence worth…

      1. Also – Always worth going through the day’s action.
        If you move chart back – to the open and just scroll through with the right arrow – you can recreate the market move as it happened.
        Just an idea..

        1. I’m having a little luck with your trio system atm hugh, although tracking back through my alerts from the past week or so I am seeing a rather incredible coincidence occuring.

          RSI Trio alerts that pop up before 12pm have so far been twice as likely to indicate the correct direction over the next 30minutes

          I am 100% convinced that it is just coincidence as I said but I thought it was interesting.

          Happy trading folks

          1. Milks and ftsewhoopie, I feel your pain. Last two days were extremely disapponting. I was short both days and missed huge drops at the close. Do I regret it? No. There is always another day. Markets will always be there, make sure you are around to trade them! Trade safe

          2. The RSI Trio entries are good ..sometimes it’s just a good place to start having a look …contra trend trades.
            What I found the best thing to do is to tuck your entry a the top or bottom of the last but one candle & then be aware of the flags. ( Like we had today..)
            What do you use ? …Do you have a set of rule based entries ?
            I think I’m going to put some together on a chart and post here…
            It’s always surprises me how hard it is to follow a set of rules though !

          3. Hugh, I use divergences to enter trades near support and resistance lines. A bit of Elliot wave counting is also something I look at. Reason for entry today was bullish divergence on 5 min combined with hidden bullish divergence on 30 min.

            I have seen that when the macd aligns across all the timeframes, you get pretty powerful signals

          4. I am planning to post a note on my blog on divergences and will share with everyone once I have it ready

          5. Recently I had called a similar trade, on DOW it went onto make new intermediate highs. The intensity on this move is similar so I am holding in hope of 17000

          6. Icarus – I look forward to it.
            Even just using a MA 30 on 5 mins is good (Trend Trading). Let it close above or below – then enter on the break higher or lower of that first bar – 2nd part of the trade is to enter on the touch of the MA.
            Repeat in either direction.
            If you’ve got contra trade indicators / oscillators up – they’ll likely uncertain about the entry. TMI

  66. What I have also noticed recently is that I get the best signals at three times, before market open, at close and midday

  69. Icarus, Hugh & ftsewhoopsie thanks for the replies. The problem I have is I don’t even know where you guys get your resistances and supports, eg on the dow u guys mention 16135 and 16369. I cannot find them on any of the charts on investing.com or other places.
    Indicators like Wallace and gromit and tmfp’s rsi 10 20/80 gave me some ideas but don’t seem to work for me or I am missing something. I was using Bollinger and macd’s 5/10/20 sma’s and Elliot waves at one point. But guess what I forgot how to use them!

    I made a lot on this greek crisis buying at the bottom or 200 points off and waiting and waiting but last few weeks have been a mess. I lost, got depressed stayed out and don’t know where to begin again.

    Yes I know I’m feeling sorry for myself but my real fear is after teaching myself about the markets I will never get it. I get the feeling u guys, seem to be able tell when to get out and do so at b/e or a few points profit, whereas I either close out too soon and miss out or hold a loser too long.

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