Good morning. Well now we have China having a wobble again as the next thing to drive markets lower, which they certainly did yesterday. However, having had a low just below 6500 yesterday the FTSE has bounced back overnight and risen to 6545. A dip from here and then further rises will play out nicely with the moving averages, and that decent bearishness might curtail any rate rises in the near future – maybe pushing back the Fed’s mooted September date. we will find out on Wednesday when they might give us a bit more of a clue. Greece also threw a bit of a spanner in the works yesterday with leaking of the plan for a dual currency – something that everyone had joked about as using the Drachma on the black market had become a standing joke, with a grain of truth it turns out!
US & Asia Overnight from Bloomberg
Asian stocks dropped after a rout in Chinese equities drove global shares lower.
The MSCI Asia Pacific Index declined 0.7 percent to 139.94 as of 9:04 a.m. in Tokyo, extending its five-day fall to 3.7 percent. The Shanghai Composite Index plunged the most in eight years on Monday, intensifying concern government efforts to prop up shares are unsustainable. The turmoil bolstered speculation the Federal Reserve will keep U.S. interest rates lower for longer.
“Extreme caution is needed here,” said Matthew Sherwood, Sydney-based head of investment strategy at Perpetual Ltd., which manages A$33 billion ($24 billion). “The return of market volatility in China will be a significant discussion point at the U.S. Fed. in terms of what this is telling us about the Chinese economy. There is a lot of global weakness and significant external risk.”
Japan’s Topix index declined 1.2 percent as the yen held three days of gains to trade at 123.27 per dollar. South Korea’s Kospi index retreated 0.6 percent and Australia’s S&P/ASX 200 Index slid 0.4 percent. New Zealand’s NZX 50 Index lost 0.3 percent.
After the 8.5 percent slide in the Shanghai Composite, the Standard & Poor’s 500 Index declined 0.6 percent at the close in New York on Monday, falling for a fifth day. European stocks sank 2.2 percent and emerging-market shares lost 2 percent.
Continued Support
China’s securities regulator assured investors the government hasn’t withdrawn support for equities.
The China Securities Regulatory Commission will continue to “stabilize” the market and “prevent systemic risk,” spokesman Zhang Xiaojun said in a statement on Monday. He was responding to media reports saying the government was pulling back from support measures adopted after the China’s stock market began tumbling last month, according to the statement.
The International Monetary Fund recently urged China to unwind its support measures, saying share prices should be allowed to settle through market forces, a person familiar with the matter said last week.
Futures on the FTSE China A50 Index, which tracks the largest Chinese companies, slipped 0.2 percent in most recent trading. Contracts on a gauge of mainland shares listed on Hong Kong lost 0.6 percent.
E-mini futures on the S&P 500 rose less than 0.1 percent. [Ref]
FTSE Outlook
An overnight rise to 6545 looks good for an initial pullback towards the 6520 area where there is, at present, some decent support. As such a long from this area for another test of 6545, and possibly onto 6590 looks a decent set up, certainly for this morning. The US bulls will be hoping that the current bearishness makes the Fed think twice about rate rises in September, and to be honest I think its too soon to raise interest rates. The housing market in the UK is certainly going to get a shock when they start going up. I’ve always thought it would make more sense to have a fixed rate for the life of the mortgage rather than trying to make everyone gamble on what rates are going to do, but anyway. Back to the FTSE and if the bulls break 6545 then the top of the 30min channel at 6575 comes into play, with 6590 above that. The lows from yesterday at 6495 are the support for today if 6520 breaks, and we also have the bottom of the 30min channel at 6490. Todays pivot is 6529 which wasn’t much resistance on that overnight rise, but might hold as support on this dip back from 6545 (which has started while writing this). Generally, despite all the headlines and bearish press around, I think a rise is on the cards.
Morning all.
Nick’s analysis looks pretty spot on (i.e. agrees with mine lol)
It looks like one of those lazy ranging mornings selling at 42 and buying at 26 for 10, with 10 pt stops till it goes wrong.
Glad we agree – I’ve been doing that all morning. Looks to me like the break could be to the upside – when it coils like this it/ makes a sort of ascending triangle there’s a higher probability of a continuation pattern. Oh – and I did spot a gap at 49.8 that is screaming ‘fill me’!
If it hits 6545 5 min bar above would you say long is on for 6592?
Personally, I’d say that’s a bit premature, my approach atm is shorting 42 with a 10 pt stop and probably turning it round to a long if stopped. So a break of 45 might run up to 50, consolidate and then confirm or fail.
I think any rise after breaking will be slow and see resistance from 65. I would start medium term shorting at 72, 82, 92 and 02 with a stop at 6640.
Looks like we’re having a go now…
One-direction Tuesday – I think buying the dips is safer. I can even see this reaching 6630 by tomorrow – don’t forget it’s FOMC on Weds at 19.00 – usually see a rise into that event from the US. I’m going to start my next wave of shorting after we’ve seen 6615-6630 – unless I get a signal before.
Yeah, I see where you’re coming from ZZ, I think I’ll see how today and tomorrow play out before rushing to replace the shorts I covered.
My stop long at 52 virtually covers my remaining MP short atm, so it’s sit back and scalp time for the mo.
Still think it’s a dead cat mind you. 🙂
Yeah – I agree – I think this bounce is a bit like we had at the end of June/early July where the cat stayed up for 2-3 days before dropping. My 10-min Jagger-Zagger has been on a raging buy since 03:00 this morning. 2-hour Jagger-Zagger is still on a sell and will take a few up and down gyrations before it goes onto a buy.
It’s perfectly possible. You’d need to put your stop below 20. Bear in mind there will be lots of little resistances on the way up – it could stop and retrace in the 70s or 80s – 85-88 is the previous high. I think with a push from our cousins over the pond this afternoon more up is the way.
Hi guys, sorry to butt into the conversation but just have a couple of questions – I’ve been following the blog and comments on here for a while and find it really helpful!
I’ve been trading for around 6 years now, but finally have a strategy that seems to really work and that is based around the FTSE 100. I’m hoping next year to start trading full time using this.
So I was just hoping to know if you guys do trade full time for a living, and if so how long have you been doing it for? Is it genuinely a sustainable lifestyle and job? And how much capital do you think you need to start trading fulltime/how much risk do you usually take?
Sorry for all the questions but I know you guys will have the answers!
Cheers 🙂
Hello mate, yeah, I make a modest living at it, sit here 50+ hours a week, treat it like a job that I can take holidays from any time I like 🙂
Successful trading is about self discipline, sticking with what makes sense to you and having realistic goals, basically applying positive real life skills and avoiding emotional extremes and ego excesses.
My motto is the Einstein quote
“The definition of insanity is doing something over and over again and expecting a different result.”
Good Luck (you’ll need some of that too).
Hi tmfp, thanks for getting back to me!
It’s the freedom element that attracts me as well, having no boss and being able to take time off after a successful week would be great.
Are you never tempted to aggressively compound your returns and try to significantly grow your account? My plan is to spend at least a year or maybe two taking as little cash out as I can and try to compound up to a big account so ultimately my returns are bigger. I know this carries more risk in terms of getting to that account size but I’m confident in my strategy and am willing to take my time.
Thanks again for your help!
Leverage is a great thing, but it cuts both ways.
Try and restrain the fantasies of yachts and Ferraris, learn your craft, don’t dream about them.
😉
Don’t worry, I’ve been trading for too long to know it’s not all plain sailing! For me the key is risk management, I know that’s a pretty obvious point but so many people seem to misunderstand it! I know that I can leverage and I can compound because my risk management is good enough to handle the swings, and over a period of time my returns average out to a positive number.
I’m so glad I’ve found this website, I’ve been looking for quite some time to find people that trade mainly the FTSE, they seem few and far between!
tmfp
now that the price is now 6565 can I ask you your plans?
1. Your 42 short – stop 10 – have you closed this?
2. you said consolidating at 50 – so are you short or long on this – has the price confirmed direction yet?
3. you said medium shorts are in order from 72 82 etc – is this still the plan
you seem to be the best trader that I have seen and as I said yesterday would like to follow your thoughts and insights on your trading?
ps i am still long from yesterday aiming for 91 – any advise on this please ?
Hello mate sorry only just seen this
1 Yes I stopped it at 52 and went long at 52.
2 It was just an observation of what I thought might happen, and basically did.
3 That was my plan for my medium term account, got a bit talked out of it for 48 hours, but overall my view is bearish and I will sell into any rallies to add to my 6710 medium term short, stop 6740.
I was never drinking the Kool Aid too much about a huge rally today, but that was a brave logical long you took last night.
Now (6548) you’re looking at a market that’s risen 70 pts and pulled back 30 after a protracted fall. If you still believe in the long side, I’d put a stop at 15 and see how it goes.
A short at 65, looking for a test of 60 then 50, 8 pt stop.
stop to b/e
That dip appears to have run its course so out for 5
Playing out nicely so far isn’t it.
http://ec.md.it-finance.com/ProRealTime_V10/display_chartimage.phtml?name=xf03w3nlrl0fv55g468h3kciy&type=png
Give the man a biscuit 🙂
Hob Nob please 🙂
Buying at 46.7 if seen. Exit 85. Stop 10
entry at 14.32. stop set to 6519. Will take half at 6562 and set rest to b/e there.
dip was more than I like – riks of a drop back to 34 – closing at b/e
Senu if you are about I wondered if you held your long from Friday?
I closed all @ 75 on Monday. Bit of a loss. bad trade.. learnt a lesson. 🙂
I’m sorry you lost out…. I closed mine at 6546.6 Friday about 8.30pm got a really bad feeling all of a sudden and closed at a loss, it’s right back in the ballpark now though but I lost all confidence in it.
tmfp
what do you average daily & weekly in terms of points?
Getting near tmi, pj, we’re a bit British about that sort of thing here, but in three figures a week on average.
I know it’s only a bit of light lunchtime wandering about, but that’s a fail really on the upside. Not much support before 44 really if 55 goes.
I’m a perma-bull today and as long as 35-40 holds it could be a bull flag 🙂 90% convinced we’ll be testing the 60s again (bar a chinese-style melt-down).
Sure, I’d probably long around 40 for a strong DOW.
In all seriousness I’m going to watch the VIX this afternoon. So long as that stays under its 200 ma at 15.38 then we have a chance of the bounce to continue. If it holds above 15.38 (like it did yesterday) then the greater the chance we may dip again. Pattern-wise we’ve had two push ups and I think it will want to try a third at least.
I’ve always struggled with VIX/price correlation.
I assumed that the spike to 18 yesterday indicated increased call option demand at the lows. The problem is, of course, that you don’t know whether it’s puts or calls in demand and who is hedging what positions.
I’ve always seen it as a volatility/fear index. When everything’s hunkydory it languishes in single figures. When everyone thinks the sky is going to fall in it hits the teens/20s. There seems to be an inverse relationship with equities. Just my take on it – may be wrong. I think it only got to 16 yesterday.
Well yes, it is related to volatility obviously, but to take that ‘fear’ misnomer as implying falling prices is not right imo.
When the VIX increases, it is essentially saying that people are prepared to pay more for options, but that’s both put and call so you can’t extrapolate that the underlying asset is expected to go up or down, just be more volatile.
Yeah, 16 not 18 my bad, was the high which came at the same time as index lows. If one thought it was cheap but didn’t fancy an outright buy, then calls would have been in more demand resulting in a higher VIX.
Ayway, a crap US opening makes it buy time I reckon, here we are at 40.
Thanks for your take on this. I was following they way a US trader uses Vix. Interestingly when we had that dip down to 23 at the US open the Vix climbed above its 200 ma at 15.35, but after we started the climb back up again it fell below the 200 ma to 14.39. I’ve not watched it that closely, but it could be a possible signal that’s worth adding to the mix.
Sticking half heartedly with that 40 long for a while, should have dumped it for 10 or so.
The bulls really need a higher high/higher low short term.
It was all set up for a good rally today, and is failing pretty miserably so far. imo.
Nah, out and short
Getting a bit oversold short term, so out at 27 for 10.
That old tart Fibonacci tells us that today’s high is virtually exactly 23.6% rt of 6811/6490 which, should that remain so for tmrw too, means that this is the weakest of dead cats.
I think the mad half hour might be pretty lively, 20 either way?
I’m going for the test of the lows option, so short at 51, 10 pt stop (higher high) despite the reasonably strong DOW.
FAIL. Would sell it again, but we are now in the hands of the DOW which does what it likes.
See what we wake up to.
Cheers all.