6400 still a possibility, maybe 6370?

Good morning. Almost followed the script yesterday but a little annoying that it just missed the optimum shorting level at 6471 before dropping. We got the little bounce and then more downside, but 6430ish has held twice as support now. Markets didn’t seem that fussed in the end with regards to the actual government shut down in the US, compared to the drop we saw when they were still negotiating.  Looking at the charts and the failure of the S&P to get back above 1701 suggests still more bearishness to come (S&P hit 1698 and then fell back yesterday). The main issue that’s looming is of course the debt ceiling and the worry will be that the negotiations on 17th October will also end in deadlock, and that’s more worrying than a one day government shut down. We have been here before with debt ceiling talks and at the last minute agreement was reached. I expect it will similarly go down to the wire this time. If no agreement is reached then the US will be at risk of defaulting which will rattle markets quite a bit I would expect.

Asia Overnight from Bloomberg

Asian stocks outside Japan rose as investors speculated economic effects would be limited from the first partial U.S. government shutdown in 17 years. Japanese shares fell.

The MSCI Asia Pacific excluding Japan Index gained 0.5 percent to 463.09 as of 12:59 p.m. in Tokyo. The MSCI Asia Pacific Index that includes Japanese shares slipped 0.1 percent to 138.63. The U.S. government is in partial shutdown after lawmakers failed to agree on a federal budget. Congress also faces a dispute over raising the $16.7 trillion debt limit this month.

“People see this is a short-term impact, but the key question is around the debt ceiling and that’s what people are looking forward to,” said Chris Weston, chief market strategist at IG Markets Ltd. in Melbourne. “If you take away the U.S. fiscal position, then equity appreciation is still very strong.”

Japan’s Topix (TPX) index fell 1.1 percent after rising 0.5 percent. Prime Minister Shinzo Abe yesterday unveiled a 5 trillion yen ($51 billion) stimulus package to cushion the first sales-tax increase since 1997.

Shutdown Costs

Closing down parts of the government will cost the U.S. at least $300 million a day in lost economic output at the start, according to IHS Inc., with effects increasing if a prolonged impasse dents consumer and business confidence.

US Futures

Futures on the Standard & Poor’s 500 Index fell 0.1 percent today after the measure gained 0.8 percent yesterday. The U.S. government began its first partial shutdown in 17 years yesterday as Republicans and Democrats remained at odds over whether to tie any changes to the 2010 Affordable Care Act to a short-term extension of government funding. As many as 800,000 federal employees were out of work, while some services were halted.

Debt Ceiling

The U.S. has begun using the final extraordinary measures to avoid breaching the nation’s debt limit, Treasury Secretary Jacob J. Lew said as he urged Congress to increase borrowing authority “immediately.” Lew, in a letter addressed to House Speaker John Boehner dated today, repeated that the measures will be exhausted no later than Oct. 17. When that happens, “we will be left to meet our country’s commitments at that time with only approximately $30 billion,” he said, “far short of net expenditures on certain days, which can be as high as $60 billion.”

Lew and President Barack Obama have said they won’t negotiate on the limit, which is tied to obligations the U.S. has already incurred. Boehner, an Ohio Republican, has issued a list of demands before he’ll support raising the ceiling. His conditions include approval of TransCanada Corp. (TRP)’s Keystone XL pipeline, major revisions to the tax code and a one-year delay of the insurance mandate in the Obama health-care law.

FTSE Outlook

ftse bullish scenario
ftse bullish scenario

The bulls managed to defend the 6430 area mentioned yesterday as the level of support. If that breaks then 6400 is still viable. However, they haven’t been able to put a lot of distance between 6430 and where we currently are, and with the S&P looking likely for more downside they still have a job on their hands. I mentioned yesterday that I still expect one more low before a rise into the end of the year and I think that’s still the case. A low early November is what I am thinking. For that plan to be invalidated the bulls need prices above 6520 soon, and above 6600 for a breakout to the upside. 6600 is the top of the 20 day Raff channel. 6520 is the top of the 10 day Raff channel.

For today the EMAs on the 30 minute chart are bearish so I expect we will dip down to the ProTrend line at 6430 again initially. If, and it’s a big If, bulls can break the pivot at 6450 then we should test the top of the 30 minute channel at around 6485. What happens there is less clear though I am favouring downside. The 6485/95 area might offer up some resistance but if the rise is strong then it should test the top of the 10 day Raff at 6520 – and that would get a bigger drop. There is a bit of resistance at 6470 as well, (circled), though the blue arrows are my preferred plan. I have also plotted a couple of pink arrows in case those resistance levels mentioned hold.

184 Comments

  1. I am so unlucky person. A whole hour waited for this short from 6402.8 but it started pushing up. So annoyed. Just can’t get into profit at all.

      1. This drop was everything to me. I got a win and now above my yesterday’s b/e. But it was too emotional, double stake and everything. But I got it. From 6510.5 to 6495. Now no more trading today. Too much screaming and shouting. 9 trades today, after 6 consecutive losses of -25 points (my usual stake, but it includes trades with double stake) I won on this drop 31 points. So I got 6 points profit. Hurray.

    1. Agreed. Nick is suggesting a low in November so we may go even lower – after 6338 the next level would be around 6220. However we are both expecting a good bounce from there to at least the 6600 mark by the end of the year. We should certainly see a good bounce once the debt ceiling is resolved – like previously but we also have to factor in tapering which has to start in either October or November.

    1. With 6430 breaking i had 6404 next, then 6370 after that. S&P needs to hold 1682 for a push back up across the board. IMHO.

      1. Thanks
        I currently use the 20,50 & 200 SMA on all timeframes.
        I guess with the EMAs they are more responsive to trend – what advantage do you see with these? Out of interest.
        Adam.

  6. I have no idea where it’s going now. Some people say it’s going down to 6330, Nick said on the chart 6480, so I am really concerned here really.
    This drop could be just 61.8% retrace of that rise we’ve had from 6382 and we are still heading long, or it could be just a start of the way to 6330
    ???

    1. Cos I was busy closing short, no way I would have managed to take this long at the same time. Have anybody managed?

    1. Sorry you missed the points lol, had a lower pip trade for yesterday going so got myself 25 pips.

      Reckon we might touch 6400 again, before the rise towards the close.

      1. thanks ahwab. miss some, win some, lose some! Too high a trade value to hold overnight. a smaller short running from 6430 so hoping for 6400. glad to hear your winning some, lol

      1. 6395, but I don`t think it will drop to sub 6410 now until closing time by which people I assume will be selling.

          1. Nice, still keeping mine, i take into account the hourly selling so hopefully might see 6630. Tbh it hurts when I see myself in profit then don`t take it and end up either losing or b/e, but taking the risk this time round
            as some good resistance 6383…

          1. Sorry 6430 was typing offhandedly, Yeah that 6383 showed some good resistance August 22, so using that =/.

  13. Hi,

    Lol…pump and dump indeed Adam!! 😉 Those morons spiked the dow in the last half hour to touch 15215 yesterday to take out the short stop losses so that it could touch 15050 today. Kind of weird was it not the dow rally yesterday on the shutdown?? lol

    Hi Javed..sorry been busy will e mail you today or tmrw. Just in case I forget…my e mail is rayasitj@yahoo.co.uk

    Thanks

    1. As I said in my post Jack my stop was 6390, and got my 6430 on the dot =)

      P.s. Don`t take me for one of those bs traders that say what they did after trade looks good to big themselves up, I am very open about my losses like yourself.

        1. I don`t know, although Nick expects bullishness to 6460+, I just can`t see it happening. Will trade tomorrow instead…

    1. Ahwab, are you still holding your buy? dow recovering good and FTSE futures too. Should be a gap up for tomorrow

  19. Closed all positions at 6442. Not really sure about going long too risky.

    Good luck c59 might see a drop 8:00 to 9:00 before the close.

  20. Shorted 6450 looking for 6530 to finish the day. Dont think ftse/DOW have the legs to climb higher. Stop & 6465…

  21. Nice pin bar formed on the daily now who would bet on that failing and breaking down to 6300…?? That would be me 🙂

  23. Price action today, got to target for short sellers to cover @ 6400, next leg up could be on the cards if the mining stocks attract buyers. My daily chart is showing that wave 2 target hit and it bounced.. wave 3 is always the biggest wave which could take this to all highs.. Lets wait and see…

      1. Personally I am, if tonight is a slow decline I will keep overnight, if we hit 6427 by 9:15 then I am out.

          1. ahwab, does the spread widen on your platform at 9pm? if so, won’t 6 be too tight? the spread on my platform is 1point during regular hours, 1.5point at 4.30pm until 9pm, then 6points overnight until open of regular hours at 8am.

  26. 6 points from the 3 pips added on, I`m on the fence at the moment, I`m waiting for the last hour, to see the daily candlestick pattern.

        1. too true. just closed for tiny profit. was sitting on large paper loss since 4.30pm….came good and up ok for day tho

    1. I wonder if it will push to 6480 as spike before shorts (if any short. Maybe I am wrong thinking about short today).

        1. I need a more substantial drop, to 6430 for example, but I will see PA, it’s flat at the moment so no trades for now.

  32. FTSE 4hrs/Daily – Still early days, and subject to US developments, but getting first indications of upturn. So you might be spot on Javed! 😉

  33. Thanks Jim – you were spot on last time!
    Having a couple of moderate negative p&l months currently but have to take the rough with the smooth.

  34. cant see anything going up meaningfully until US of A sorts its self out especially with cliff looming

    1. well done awhab. i think i’ll go short with you if 6460 fails & i’m quick enough. Thursday afternoons can be strong though in anticipation of a strong friday

    1. Too many people selling atm 63% of ig clients lol, I`m closing my position if it exceeds 6465 as next stop looks to be 6480

  42. If going up 6500, how much will it continue going up?

    If going down 6400, how much will it continue going down?

    Need a clear aanswer?

    I short at 6402 loss atm.
    please advice?

  43. Terry
    I am long FTSE
    Inverse H&S 10-minute targets 6520 region. Ties in with Gap Fill at 6515
    Will close @ 6510

  50. Out of here now. Finished this short. Don’t have faith in it. If even Nick didn’t write anything, it’s not worth it.

    1. so long as you live to fight another day! i took the risk of averaging down….not advisable really

        1. I don’t understand, as I see the market went short from 6472, why did you lose on short?
          I, in my turn, should have held that short taken from 6470 but then it was my time to go and I didn’t want to risk what I don’t see. Well, a pity though.

    1. I use ProRealTime charts via IG. Pretty good – an excellent programming language is available too, for your own indicators and ProScreeners (queries).

      1. sorry senu, i’m not experienced enough to predict targets. i tend to close soon after achieving profit unless theres a clear trend that even i can see :/

          2. i usually spend most of my week looking at missed opportunities though :/ Finally moved into profit this week after sitting on large losses. i don’t want to get caught short so often going forwards

    1. they’ve brought out the big guns to pile on the doom & gloom…anyone think there’s a deal going to be agreed soon on the USA debt?

  61. Lost out of -40 pips but i trade low pips todays gain lost… Dont see why people say bulls all the time though…

      2. Looks like you`ve being doing well since your b/e hopefully you withdraw some and treat yourself for the weekend =/

  76. What a shame. Tried long 29.5 got to +7 it dropped, got only 2 quid. Then tried short from 35, got 2 quid. For me this type of price action (flat price action) is a slow motion bomb action: It may explode but which direction?

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