Support 6367 6363 6329 6326 6322 Resistance 6427 6432 6441 6458 6465

Good morning. The market had a bit of a spike down at the open yesterday on negative announcements from mining company BHP Billiton and Aberdeen Asset Management, unfortunately not quite low enough to trigger the buy at 6320 though, hitting 6328 instead. During the rest of the day the market stabilised and traded near the unchanged level as most eyes were on the ECB announcement on Thursday. The short at 6378 managed a few points but it was a pretty lacklustre session once the bounce from the 6328 had occurred. It looks like a wait and see situation for traders and so we could be locked into the 6325-6425 range until Thursday.

US & Asia Overnight from Bloomberg
China’s benchmark stock index fell to the lowest level in a month after official data showed manufacturing conditions are deteriorating.

The Shanghai Composite Index slipped 0.5 percent to 3,427.25 at 1:06 p.m., led by financial and energy companies. China’s slump was in stark contrast to regional markets, including Hong Kong, where the Hang Seng China Enterprises Index jumped 1.9 percent to halt a six-day losing streak. The yuan weakened 0.2 percent in offshore trading after the International Monetary Fund said it would add it to its basket of reserve currencies.

The Shanghai Composite’s rebound from a $5 trillion rout is starting to ease after the gauge closed out November with a 1.9 percent gain, the smallest percentage move since January. Rising investor optimism with the return to a bull market earlier in the month has given way to caution as the government started withdrawing market support. Recent data have also mostly been dismal with exports falling, industrial output slowing and producer prices continuing declines. Tuesday’s report showed the official purchasing managers index at 49.6 in November, down from October’s 49.8 and below the level of expansion.

“Sentiment in the Shanghai market was affected by the PMI number,” said William Wong, head of sales trading at Shenwan Hongyuan Group Co. in Hong Kong. “The SDR bid has translated to an irreversible process of financial liberalization and will benefit China’s financial sector in the long run. The A shares will react to the news over time.”

In Shanghai, coal producers led declines for energy producers, with Wintime Energy Co. plunging 2.1 percent. Bank of China Ltd. paced losses for lenders, sliding 2.7 percent. Brokerages also retreated, with Western Securities Co. dropping 4.1 percent.

China’s manufacturing conditions slipped to the weakest level in more than three years as sluggishness in the nation’s old growth drivers add to risks facing the government’s growth target of 7 percent. Six central bank interest-rate cuts in a year haven’t been enough to spur a recovery in manufacturing, which has continued to weaken while activity in the services sector has shown more strength.

Another manufacturing PMI released by Caixin Media and Markit Economics edged up to 48.6 in November, exceeding the median estimate of 48.3. The gauge has a smaller sample size and includes smaller companies and exporters.

Hong Kong’s H-shares gauge headed for its biggest gain in a month, benefiting from a return of risk appetite. Benchmark share measures from Tokyo to Sydney and Seoul climbed at least 1 percent as Standard & Poor’s 500 Index futures rose 0.5 percent. The H-shares measure slumped 5.8 percent last month, the worst performance among major stock gauges in Asia.

IMF Move
The IMF said the Chinese currency will join the dollar, euro, pound and yen in its Special Drawing Rights basket. While yuan inclusion is short-term negative for Chinese stocks, it is positive in the long term, UBS Group AG analysts wrote. The risk of depreciation is likely negative for stocks on a three- to six-month time horizon, they said. Still, increased capital account opening and further domestic capital market development, coupled with very low global exposure to Chinese assets currently, could bring more inflows in the long term, they said.

“We see in particular the yuan inclusion to the SDR basket has lifted sentiment in the Asian stock market,” said Adrian Zuercher, the Hong Kong-based head of Asia asset allocation at UBS. “We think Asia is attractively valued and there is too much pessimism on China.”

U.S. short sellers are piling on bets against Chinese equities at the fastest pace since the height of the nation’s stock-market bubble five months ago. Short interest in the largest U.S. exchange-traded fund tracking domestic Chinese stocks more than doubled in two weeks to a record 28 percent of shares outstanding on Nov. 27, according to data compiled by Markit and Bloomberg. When such wagers last climbed this fast in June, short sellers proved prescient as China’s equity-market boom turned into a bust.

Hong Kong’s Hang Seng Index rose for the first time in seven days, adding 1.7 percent. The CSI 300 Index declined 0.5 percent.

“Hong Kong has dropped for quite a few days so they’re taking it as an excuse to squeeze those short sellers and the latter has to do short covering,” said Louis Tse, a Hong Kong-based director at VC Brokerage Ltd. [Bloomberg]

FTSE Outlook and Prediction

FTSE 100 Prediction
FTSE 100 Prediction

As mentioned above its a bit of wait and see till the ECB on Thursday and what, if any, stimulus measures might be announced. We also have a commons vote on Wednesday about bombing Syria, though markets have largely remained unperturbed by this. Anyway, onto today. We have the pivot at 6363 so I think we may see some support here initially, though the 6326 area is support below this where we have the 10 day Bianca channel and yesterday’s low – so worth a long at this level if it gets this level. Resistance wise we have 6400 as the main attraction, with 6425/6430 above that and worth a short from. It’s the first day of the new month so usually slightly bullish as there is the influx of new money for the month, but any initial rise to the 6430 area this morning could easily reverse. Gold has moved up off its recent lows, and we had a bullish ASX session today, so there is a slight bullish tinge to todays proceedings!

113 Comments

    1. Tmfp I sold that Ftse long from 83 last night at 89 about 2.30am but I’m minimum long FTSE again back at 89

      1. Glad you got a profit on it anstel, but running 33 loss to take 6 profit isn’t sustainable. What was your exit strategy? Say the Chinese had one of their ‘moments’ and at 2.30 am you were looking at 6289, not 6389….

        I don’t want to seem like I’m getting on your back, but this R/R shit is important.
        As soon as you find yourself “hoping”, that means you’ve done something wrong, it’s as simple as that.

        1. That’s my biggest area of inner conflict tmfp,I dont mind you getting on my back,I need a good slap to remind me to reel it in.i like to give the positions lots of room,I don’t think that I can trade with tight stops.i need to figure out a compromise that I can live with,my biggest previous failure has been trading too big,that side I think I’m winning with but you are right that trade last night was a crap trade even though it made money.

  3. Morning.
    Still a fail at >6400, but looks to be trying to build off 6380, so treating that as the range for the time being, preferring the short side (for a change lol).
    If 80 goes, 70 is a fairly important hold and on the upside a 6414 break could run away.

      1. Nick’s quite rightly got resistance at 27/32, Mahony at 29 as well, but my feeling is that a spike to 14+ would maybe pull back to 400 but probably be a big enough break to establish that level as good support.
        Only got a small short from 04 left atm anyway, stop at 97 looking to cover on a break to low 70’s.
        DAX looking a bit weak, testing lows now, smelling like a fail.
        GL as ever.

    1. Interesting, anstel! I’m normally the biggest bull of all but as I said the other day I can see possible upside to around 6450 and possible downside to 6250. In terms of risk reward I’d rather be short (which I am so take that with a pinch of salt!)

        2. Hi anstel I dont like Short or Long here either,so I’m going with the morning off option,you must have had a longer week already than me,so dont forget the cash is a trade trade.GL.

          1. Hi WSF,been doin quite well in a small way just took a 35 pt hit on the Dax but I’m back in and hoping to recover it.FWIW I think it’s goin up.

      1. I tend to ignore the DOW completely until about 13.30 custard, I know we live in a 24/7 world but it’s 5am there, that index is just a ghost atm.
        I’m looking at the DAX’s reaction at 11330 after breaking this morning’s lows, if it doesn’t bounce to at least 350 soon then more weakness looks likely to me.

  7. Hello all

    Not had a chance to check the FTSE out much today, but it’s looking strong. Chucked a speculative long on BHP Biliton from 800ish this morning. Classic reversal candle and bounce from the 2008 low. Is this the bottom? I doubt it, but there’ll def be a decent bounce.

  8. I have these couple of questions if you don’t mind. When you guys analyse FTSE 100 stocks using charts for entry and exist positions for swing trading, do you factor in what is happening to the the broader market or do you analyse them on a standalone basis? What I find is that since these companies are components of the index they more often then not track the broader market quite closely (or at least quite broadly), sometimes rendering support and resistance on their charts pretty useless when there is a powerful drop or rise in the FTSE over a two-three week period. I know this is where money management comes in if things go wrong.

    Leading on from that, during the credit crisis of 2008, many FTSE 100 stocks dropped 60-80% within a year and anyone long during then will have been burned. How do anticipate the moment(s) when we are entering a bear or bull market? Is it following macroeconomic climate situation of the day i.e. the months following up to the eventual breaking point? During the powerful but quite brief bear market such as that of 2008 it seems stocks pay little heed to support points and the same is true in the opposite direction during a bull market.

    Secondly, and this more related to day trading the FTSE 100 index. I have noticed you guys often have very short stops, sometimes as little as 10 points, so what if you are long on the FTSE and some bad news comes out of the States subsequently leading to a dramatic fall, let’s say 120 points within a matter of seconds, do your stops get covered in that situation or do you face a much bigger loss than anticipated? If they don’t get covered then any progress (the profits you’ve built from several previous days) could well be undone.

    1. Lots of questions with no real definitive answers mate.
      Some people trade purely technically, some purely fundamentally, some a hybrid of the two.
      Whether you long term trade or intraday is usually dependent on your ‘real world’ situation and your own psychological makeup.
      “Black swan” type events which lead to a large abrupt movement are by nature unpredictable. Some platforms (IG) offer a guaranteed stop loss at a small extra spread, but can be quite a distance away.
      The stats on individuals successfully day trading aren’t very encouraging.
      To state the obvious, not losing money is as important as making it, hence tight stop losses suit short term trading, but they should have a trading logic as well as a financial one.

      1. I am not saying technicals don’t work, they do. It’s just that when there is a large move in the FTSE up or down that is when stocks can seem to ride with it through even quite established support and resistance levels, but I think lot of the time when trading is not volatile stocks are more observant of the technical side. I must say, day trading is probably not for me, I don’t like the idea of being glued to the screen. Can’t be good for health when you’re living every moment by the movement of ticks. I think my comfort level is swing trading. I could get into a stock and hold for days, weeks, or months (if needed). In the short time I have been doing this I have seen some encouraging results, though it’s very early days, but my day trading has not been good. I seem to close the profits too early, and any losses are bigger than gains.

        1. Those kind of sudden movements take everyone by surprise by though,so following a Tech or Fundamental view wouldnt help avoid them and you could argue a Tech position gives you a chance of having a S/L in a good place.The Tech stuff only indicates the consensus view.There are about 28 scheduled bits of News today,so in theory any of them could be very different to expectations and have a sudden effect and then there is the permanent chance of a surprise from any of the usual Talkers or some bloke with a Bomb or Geology or the Weather or the revelation that some Co. has accounts that arent real,but a Tech view might indicate when “Insiders”seem to suspect something might happen.FWIW,just another point of view.

    1. Hi Senu been having lunch,I’m long both still,I have addressed some of my bad habits namely position size,I’m trading small now,I will not stay in at weekend even if it means taking a loss,I try not to stay in overnight but I’m a bit more flexible with that because I can watch it.Its the Stops I just can’t bring myself to place tight stops,I don’t know how I’m going to change my thinking on that,My downfalls have been position size and staying in over weekend thats what’s brought me down,if I had been smaller size and out at weekend even with no stops I would have been doing quite nicely.these stops and where to place them are an area I can’t decide on I’m afraid,best of luck Senu as always.

        1. I’m long Ftse from 88.9 looking for >402 Dax I lost 35 points on earlier but I’m long from 47 now, 400 plus target

  10. Well it still doesn’t like 400 does it, but inching closer, higher lows.
    I think the momentum will have to come from the DOW, only about 100 points away from new highs, but how much go do they have in them, flatlining but still just in positive rsi on the daily?
    Possibly marking time alround till Thurs QE and Friday NFP announcements.
    IG calling 796 opening, will they ignore the Chinese PMI’s like everyone else has?
    Our 30 point range seems likely to continue really.

  13. Here we are again, took an rsi 10 off that dip, will put it towards a short at 02.
    Dow’s in a good mood, unlike the DAX. None of them have a clear direction right now, twitchy is a good word.

  14. I have a short on Dax from 380 took half of profit at 315. My thinking is it will drop today, tomorrow to 250 before a slow grind up for ECB on thursday. Lets see if it can get there before stopping me out b/e. DOW strength is a bit worrying but even a lit bit of weakness on Dow should see Dax around 250.

  17. OK, we haven’t had a FTSE closing guess for a while, who’s in? Last entries 16.00.
    At the mo, I’d go 60 something but will wait a while for definite.

  19. Oldest system in the world: round number reversal trade. Anyone managed to get in at 6400? Nice 30 point drop. Unfortunately, I’m at work and missed it.

    1. Hi tmfp – I don’t trade the DAX – just have it kicking around on my screen – it was a trio on 15 min that caught my eye – not often seen – longer time frames are even better.
      Had a pretty good day (following my plan I posted last night ) + a couple of Shorts on Eur$ – first was on a trio @10630 and the other off a PRT line 10634

      1. I know you probably think it’s a loser but I have to trade what I think,by the way only kidding about calling you Mr yellow and Furry,it was a reference to tmfps bear infested custard,good luck to you too matey.

        1. I closed my 97 because I was worried this could go either way and outside of 4.30 there may not be much resistance.
          If it opens tomorrow 6415ish I could see you making 30 points easily so GL.

  24. Face covered in egg then! Cut both shorts (old one at 80 and this mornings at 87) at 05. Sit it out for a bit but much more strength and I’ll have another go. Off to the pub, old habits…..

          1. No worries chippy had a great Day apart from my old adversary the Dax has had a chew at my account,hopefully he will give up before Thursday.

          5. Yes it really would WSF, I’m thinking the run up to the ECB on Thursday could give us the positive sentiment we need to approach 6450 with a view of the year end touching 6500.

          6. I think it could close Dec nearer 6600,above where it opened in Jan anyway.I think that suits the script.I just dont trust this out of hours 6400 + stuff tonight when the Dow is so quiet,so I’d like a Long below where we are and maybe a Short above,6420 s & 6390 L.I think that is my plan if I see them tonight.Australia has GDP no’s at 00.30

          7. With the Dax about 170 off recent highs and ECB Thursday I will have to think very carefully about shorting this below 6450.the Ftse is 10 pts above my entry now Im not sure if I’d enter long here either,although if the Dax puts a spurt on you may get a quick hit and run long on Ftse before 9pm

          8. Very often I’ve noticed in situations like this but we get an upward movement after 9pm when it’s a 6 point spread.Mister cynical in me thinks Mr Market doesn’t want anybody to make gains so it leaps up when it’s 6 point spread to discourage traders from entering.God I’m so bloody cynical,need to loosen up…….maybe!!!!

          9. I just think the Dow looks unenthusiastic,certainly cant see it putting on enough to clear 900 tonight and I think Australia wants to go down.Cash close was 6395 so I think that area will show up again before the morning.

          13. Yeah I’m hanging on for a bit,nearly took 24 but think I will wait abit,there’s a good 90 points minimum available on the Dax I reckon so might shove it up abit more.

    1. Have a good night anstel,well done with that.I’m going to stay logged in until Australia now,want to have a look at some Shares anyway.

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