Support 6572 6560 6535 6476 6436 Resistance 6593 6612 6622 6657

Good morning. A bit unfortunate yesterday for my long order at 6520, as the low was 6521.3 and miss, before getting the rise to 6591 as expected, though it took all day to get there. Today it will be all eyes on the Fed and the prospect of rate rises, though a poor consumer confidence report out in the US yesterday might temper any enthusiasm to raise rates in September. I think he UK will follow the US lead and wait to see the effect of raising rates. Don’t want to do it too soon really….

US & Asia Overnight from Bloomberg
Asian stocks rose for the first time in six days, following U.S. and European shares higher, as investors awaited an update on monetary policy from the Federal Reserve.

The MSCI Asia Pacific Index gained 0.4 percent to 140.85 as of 9:02 a.m. in Tokyo. Better-than-estimated earnings from Pfizer Co. to Ford Motor Co. and mergers among European companies fueled Tuesday’s rally outside Asia, with a gauge of global stocks snapping a five-day slump. Traders will be combing the Fed’s post-meeting statement on Wednesday as policy makers assess the strength of economic growth amid plunging commodity prices and Chinese financial-market turmoil.

“Often when a lot of stocks get washed out, we get a rebound,” Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which oversees A$160.5 billion ($117 billion), said by phone. “The Fed will be focused on global conditions. What’s happening globally can’t be totally ignored.”

While economists see no chance the central bank will raise rates this week, they put the odds of a September boost at about 50 percent, a Bloomberg survey published July 22 showed.

Fed Chair Janet Yellen has signaled that the central bank is likely to lift rates this year, and emphasized that the pace of subsequent increases would be gradual. Data showed consumer confidence slumped in July by the most since August 2011 as Americans became less upbeat about prospects for the economy, employment and their finances.

Japan’s Topix index gained 0.5 percent. Fanuc Corp. slumped 0.8 percent in Tokyo after lowering its full-year profit forecast as demand from the information-technology industry declines.

Australia’s S&P/ASX 200 Index advanced 0.4 percent and South Korea’s Kospi index added 0.8 percent. New Zealand’s NZX 50 Index was little changed.

China Futures
Futures on the FTSE China A50 Index, a gauge tracking the country’s biggest mainland stocks, added 1.1 percent in most recent trading, while contracts on the broader Shanghai Shenzhen CSI 300 Index were down 2 percent. The Shanghai Composite Index ended Tuesday 1.7 percent lower, paring a slump of as much as 5.1 percent following Monday’s 8.5 percent tumble.

Hang Seng China Enterprises Index futures and contracts on the Hang Seng Index both rose 0.3 percent. E-mini futures on the S&P 500 were little changed. [Ref]

FTSE Outlook

FTSE 100 Prediction
FTSE 100 Prediction

So far yesterdays 6591 has held as resistance still so with the daily pivot and the bottom of the 30min channel at 6560 I am thinking that we have an initial drop to this level (maybe a slow drop). It might be a fairly flat day while we await direction from the Fed once again, with rates expected to stay the same for the moment but looking for clues as to when they may or may not rise. Below the pivot we have support at 6535, with the bottom of the 20 day Bianca below that at 6476. Not sure it will get that low today.

Above the 6591 resistance area we have the 200ema on the 30min, followed by the 10 day Bianca at 6612 which may be worth a small short, followed by the tops of those 10min and 30min PRT channels both at 6622. We then have 6657 with the 25ema on the daily as a possible stronger shorting area. Generally I think it will be fairly flat till later (7pm) when the Fed roll into town.

64 Comments

  2. Just in case anyone’s interested about what my approach is at the mo here we are:
    I’m a bear, I think this rally will fail and we will retest the 6420 lows.
    I sold my 52 long from yesterday this morning which leaves me nett short at 6710, b/e stop.
    I will be adding to that short as/if this rally continues at 6620/30/40/50/60 with a stop on all at 6720. At say £10 a pop, this would be a possible loss of £4k, against a possible profit at 6420 of £11k, so a good 11:4 risk/reward ratio.
    In the meantime, I’m day to day scalping by shorting at 80+ on the 10 period 1min rsi and longing at 20 reading with 12 pt stops. As soon as a 5 pt profit shows I’m banging a b/e stop on and looking for 10 pts maybe more, depending on the feel at the time. Nick’s 6612 sell coincided with 81.5 rsi @ 08.30and I took 20 on that (too soon as usual)
    I won’t be cluttering up this place with every trade I do.
    🙂

      1. Cheers, Senu, the rsi trading comes with a caveat because, as you know, it can stay overbought/sold in a trending market. I try to identify this by spotting a lack of normal pullback after a strong move, i.e. when it moves in steps rather than cycles.
        I’m looking at a reverse version of engulfing candles to identify this.
        Have a look at this morning’s 3 min 10. The 09.36 candle was 5.7 pts and it engulfed the next one which was the reaction, leading to a further 10 pts upside. This is still in beta, but worth looking at.
        BTW, are you ever going to get my name right?
        😉

          1. Thanks tmfp
            – Appreciate your summary.
            – On the 30 Min chart we are banging up against the trend line from 21 July – 24 July at 6592.
            Hesitation around this point..

  3. tmfp

    keep it going.
    as i said a couple of days ago – i traded to 91 and closed it this morning

    tmfp – your explanation of your thinking and trading is great and
    “”I won’t be cluttering up this place with every trade I do””
    – with your explanatory clutter, lets have more of it…..please

    you did say you were on the box for 50 hrs a day, so where else to
    let of steam….

    wish we had more of this type of comments on this board
    keep it going..

    1. Once you’ve entered a trade, if the price has moved in your favour, it’s good practice to move your stop to break even (b/e) – the original price at which the trade was opened.
      If the trade continues in your favour, this Stop can gradually be brought down so that it looks in profits.

    2. break even, i.e. position opening price.
      The theory is that, very short term, once the trade has gone into profit the size of the continuation is not predictable. As rsi extreme trading is about picking tops and bottoms it protects you from resumption of the trend.
      Can be a bit irritating if it retests the low, stops you out and then resumes, but that’s life.

  5. Hey ZZ, was looking at the VIX re our conversation yesterday with a view to VIX/S&P arbitrage.
    Looks like a good spread at -1 std. deviation VIX over the last six months i.e. +VIX ~12/13 and short S&P. Or the other way round on crossover on these values.
    Think I’ll keep an eye on that and give it a go next time, what do you reckon?

    [img]http://i.imgur.com/1mAJDKQ.png[/img]

      1. There’s definitely a clear correlation between low vix and high S&P and vice versa. I only trade the FTSE but will keep an eye on it for direction/sentiment for the S&P and potential impact on the FTSE.

        2. Sure, but that chart also implies that a low VIX doesn’t mean a low “fear factor” for S&P bulls, on the contrary, it signals a fall coming (which will probably take us with it).

          1. Yes I agree – I see what you mean about the at – 1std. deviation. Definitely a topping signal

  6. Looks like we’re going to be in a slow paint-drying session going into FOMC at 7.00pm which is the norm. The 2hr Jagger-Zagger went positive overnight which suggests caution/patience for shorts. I’m expecting that we could still see 6630 by 7pm , if the waters stay calm.

    Gaps: I got my 6615 I was after on Friday – just went in a bit too early (like 3 days!).
    We’ve got yesterday’s high at 6569 still to be hit and I’ve got a 5-min gap at 6532 which should be hit on the next flush south. When will that start? Need to see what FOMC brings. I’m not rushing for it, but planning to seed more shorts if we see 6630 this evening.

        1. Nice ride down to 85, a little miffed that my 20 sell didn’t trigger as well.
          Possible rally from here, worth a punt with a 12 pt stop (below prev low).

          2. Are you staying short?
            I think the DOW might have some Yellen legs, hope so, itching to get some serious shorts in, rally over, then carnage 🙂

          3. Long for 6616 again (another gap on the 5 min) may take all afternoon to reach but I’m patient – just hope it’s not 3 days again! 🙂

  9. Hi tmfp,

    As I’m not experienced I don’t post on here, but I like to read the posts on this site and follow it most days, although I’m not a successful trader I still enjoy the views of the board, so can I ask on your rsi trading is it the 3min chart you trade off and buy & sell in overbought or oversold areas.
    I seem to do well on a trade only to blow it on the next and so I’m trying to learn by my mistakes.
    Tks a lot
    Pete

    1. Hello Pete, it depends on the volatility, but for default I look for a signal on the 1 min 10 and if it’s confirmed by 2 and 3 min so much the better, probably would increase the stake if so. Hugh has developed a good triple confirm system.
      Added input like Nick’s channels, resistance areas, trend lines etc are important too.
      Also I keep an eye on the longer term indicators for context.

      Good Luck.

  11. Hi.
    What would you say is the best plan of action for the trading the fed later, both DOW and FTSE?
    what is most likely to happen?

    1. My plan of action is not to.
      The FTSE is virtually a clone of the DOW at that time of night and I haven’t a clue what they will do, as there is an inherent contradiction at the heart of rate rises and their effect in the US indices.
      I’ll be up at 6 looking at what’s happened after the dust settles and the Chinese have been and gone.

      2. It can be a lottery. Usual pattern is a spike that then falls back down to earth where it started. V. difficult to catch the top. You can get a false initial move that then reverses. Certainly not a safe trade. I have some longs from 6586 and 6592 that I’m looking to exit at about 6630 on a spike up unless we see that price before. Beware any surprise announcement that sends it south though. You don’t want to be long then.

  12. I think the fed is going to feed the market a bit later. ??? views…see a good rise from the DOW. Yellen the pumper!

    1. Looking for a spike up to c. 6630 on the ftse at 19.00 – we’ll see. It usually ends up back where it started after a few mins though unless there are any unexpected surprises.

      1. Longs closed at 6630 – even though it looks like we’re going to the moon! Burst through my preferred trend line. Top of revised line is now at 44 and at 19.00 it will be 6650.

    2. She seems to be quite skilled at dealing with these things, so there won’t be any shocks, I shouldn’t think.
      If you feel there’s a pump coming, why not buy now or on a dip and sell into it?

  16. Looking a bit toppy but ZZ’s 30 is quite possible before the close. And here we nearly are..
    What’s the plan Darren and Pete?

  19. I think it will get to 6700 before the next drop, but that was what I thought from 6500, I went long @6510 & got stopped out @6490 then it shot up, went long yesterday @40 closed this morning @90 & tried shorting twice today thinking it would drop to 55, and lost most of my gains from yesterday, thats why I feel like giving up.

    2. This is in my selling zone Darren and I’m not worried about it going against me for a good few points yet, but if you’re asking regarding your 21 short for the next few hours, I can’t see much downside tbh.
      I’d bite break even or near’s hand off: with the Fed nonsense coming later it could turn from a few points down to something a bit serious.
      GL.

    3. There is a valid target at 12.8/12.3 if you can wait for a drop back – can’t say when it will hit. Can’t rule out higher first, but you could be lucky.

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