6535, 6501, 6442 Support, 6570, 6585, 6606 Resistance

Good morning. Well that was a bit of a surprise this morning to wake up to a +85 FTSE amid a report that Japan’s $1.2 trillion Government Pension Investment Fund will increase holdings of equities. Yesterday dipped a bit further than expected, right down to perfectly test the 6381 bottom of the 10 day Bianca so well done those that nailed that entry. I was far too early with the 6436 one, though it did bounce a bit to start with. The morning was certainly bearish, but the US had to save face and couldn’t have a dip after canning QE so we got the afternoon rise for yet another V shaped day. We have now had a full crossing of the 10 day Bianca channel and are above resistance at 6531, so I wouldn’t be surprised to see some profit taking and shorting of this rise.

Asia Overnight from Bloomberg
Asian stocks rose after the U.S. economygrew faster than forecast and amid a report that Japan’s $1.2 trillion Government Pension Investment Fund will increase holdings of equities.

The MSCI Asia Pacific Index (MXAP)climbed 0.4 percent to 140.82 as of 9:01 a.m. in Tokyo, before markets opened in China and Hong Kong. The gauge has advanced 2.4 percent this week, the first back-to-back weekly gains since August, after the Federal Reservesaid it will end its quantitative easing program as the world’s largest economy strengthens.

The American economy expanded at a more-than-estimated annualized rate of 3.5 percent last quarter, capping its strongest six months in a decade, while other data showed fewer Americans filed applications for unemployment benefits over the past month than at any time in more than 14 years.

“Stronger than expected U.S. GDP growth was good enough to remind investors that the early stages of rate increase cycles are usually good times for stock markets,” said Ric Spooner, Sydney-based chief market analyst at CMC Markets Plc. “It’s providing a solid end to the trading week.”

Japan’s Topix index gained 1.1 percent. The nation’s public pension fund, the world’s largest, will today boost its allocation targets for local and foreign stocks to 25 percent each, and reduce domestic debt to 35 percent, the Nikkei newspaper reported.

Australia’s S&P/ASX 200 Index rose 0.5 percent. South Korea’s Kospi index advanced 0.2 percent and New Zealand’s NZX 50 Index added 0.5 percent.

FTSE Outlook

FTSE 100 Prediction
FTSE 100 Prediction

Well today is going to be interesting… I wouldn’t be surprised if we dip a bit from 6585 now we have come this far. We have broken above the Bianca channels, sitting around 6435 area, and the bulls are holding on to the gains ok so far. If they manage to break 6585 then that does change things slightly as it makes things a lot more bullish, and the drop potentials for the near term are invalidated. Above 6585 we have the 10 day Raff at 6606 (theses were levels I was expecting to be typing today!). Support wise, back test of the 6535 Bianca channels is the first level to watch for (we are not far above these), while the pivot at 6442 would be next. 100 point drop this morning is possible given the volatility. It will be interesting to see how long this bullishness lasts….. Its Friday so likely to be slightly odd, but i would be looking to short at 6565 and 6585. If it were to get very bearish, then 6395, 6355 and 6330 are the levels to watch.

Support so entry levels for a possible long

  • 6535
  • 6501
  • 6442 daily pivot
  • 6395
  • 6370
  • 6355
  • 6335

Resistance so entry levels for a possible short

  • 6570
  • 6585
  • 6606

28 Comments

  1. Morning,
    Newbie here, and learning…
    That was crazy rise, but with Governments’s pouring money into stocks and not real people, stocks will keep getting inflated. Japan hasn’t solved their economy after so many QE’s. Anyway October been crazy…I thought we will have an end of year rally in towards December…but now confused with huge rise in last 2 weeks.

  2. Hello everyone, I’ve been an IG day trader for the last couple of years and lurking here for a while. Thanks to Nick for sharing and providing this service, I find your Biancas and Raffs very useful. I have a bit of a hybrid system of RSI (3 min, 15 min and day on 10,12 and 14) fib retracements and breakout reversals and am always looking for double/triple tops and bottoms.
    I’ve been a bear for a while now, managed to catch the post Scottish referendum high, but got burnt recently believing the rally from 6070 would end around 6400 and have had a bad week, so sitting it out today.
    The FTSE seems to be split in two at the mo, optimistic openings followed by a reality check until about noon, then nervous because of the seemingly endless ability of the yanks to pull a 200+ point rally out of nowhere.
    Good luck to you all, I’ll post a few thoughts in real time for what they’re worth.
    🙂

  3. Hi TMFP, agree with your comments, no matter how much you plan levels etc, overnight jump or drop like this AM, is impossible to account for. I feel the same, when wrong, that I need a day out of trading as breather…
    Two fatal errors I have made, is keeping my position open overnight and averaging, do you or anyone have any wise words to share to avoid this in future.

      1. Agree Senu, otherwise you end up carry over the loss to bigger loss the next day…which happened to me today.

    1. I only day trade, log in at 0630 and log out with no open positions @ Dow close, my golden rule these days, I like my sleep.
      As a general rule, I will only average or double up profitable trades, depending how things develop . I always put stops in when I open and never increase them. If it doesn’t do what you expected it to after you opened the position, get out. Live to fight another day.

  4. I have trades open for weeks at a time most of the time it’s ok but on the odd occasion you get some news that send the market rocketing or plummeting the being Japan and more stimulus this time only good news here is that american market are in major overbrought mode and Europe is still f@@k no matter how they try too play it so going short now gl all

  5. From BBC website:
    “EUROZONE WOES Bad news in the eurozone. Germany retail sales fell by 3.2% in September, the worst decline since May 2008. Meanwhile, Italian unemployment rose to 12.6% in the same month, a level not seen since the 1970s. ”
    Although on economic front at the people level, things are pretty bad with costs/jobs/wages, but looking at market, we live in the best time ever, with all stock indexes at record high. I fear as the rubber band is stretched more, the fall will be more dramatic and will only catch PIs…also someone said Goldman runs the show not government’s, and they did say they expect higher year end markets…

  6. He is just saying !!!!!!

    Now, we have to ask the question: why does the global economy need more stimulus after so many years of intervention? The answer is simple, the money has gone into assets like stocks and property and not in the real economy. This is why the economy is still struggling and asset prices are rising. And this is why investors will lose confidence in the central banks, when this happens the stock market will crash.

    Right now this latest intervention is pushing the FTSE higher, I believe this move is temporary and the rally will be completely retraced. The Fed stopped buying bonds but they also know that the economy is weak, that’s why they pledged to keep interest rates low for an extended period of time.
    The rally may continue early next week but I would not be surprised if the FTSE turns down next week to retest the previous low.

    Going forward I think people will lose confidence in so called stimulus programs, the day of reckoning looms. More importantly the UK stock market is leading the way. The completion of a long term ending diagonal in October signalled the start of a bear market. Commodities are down, oil is down, stocks in the UK are down, we are now waiting for the US stock market to turn down.

    The trend is likely to reverse when the risk of a trend reversal is High. A breach of a key reversal level implies a neutral position.

    1. Yes Senu, this morning closed all my longs at 40. Though I wanted to keep longs taken at deep level. I thought better to trade what I see than what I think. Also, am not a dedicated day trader, just trading with a small pot, i couldnt control my emotions looking at 5 figure profits! I still have my gold short from 1250, will close at about 1000.

      1. Hi Javed

        How are you ? What a ride you had in these couple of weeks.
        Strong signals in all indices.
        But things can turn from one day to another.
        Meanwhile FTSE regain the 50 RSI in daily chart, so that is a big conquest for the short term.

        1. FTSE has for now the 50 ma and 100 ma to conquer (6615-6680), before any big euphoric turnaround above the 200ma. All mA´s are in decline, so FTSE seems a lor bearish

  7. “I posted in wrong trend”
    Hi Javed

    How are you ? What a ride you had in these couple of weeks.
    Strong signals in all indices.
    But things can turn from one day to another.
    Meanwhile FTSE regain the 50 RSI in daily chart, so that is a big conquest for the short term.
    FTSE has for now the 50 ma and 100 ma to conquer (6615-6680), before any big euphoric turnaround above the 200ma. All mA´s are in decline, so FTSE seems a lor bearish

  8. Hi PMS,

    Yes what a rollercoaster….probably wouldn’t have it any other way!
    Seriously at times like this have to remember it is only MTM and why I got into the trade and maintain my discipline. Of course it is tough especially when there are such large quick moves which go against you.

    I try not to monitor my positions daily but of course it is very tough. I’m confident now that we will finish higher from here at year end…..but if we don’t it doesn’t necessary make it a bad trade. A bad trade is when I don’t follow the strategy or deviate by changing my risk exposure.

    Hope that you are doing well.

    Good luck mate.

    1. Thanks for your wisdom words.
      Yes, happy with a system I developed, that is miles away from what I was used to.

      GL

      Note: FTSE has legs now for at least another leg up in the short term (6615-6680). After that it’s more difficult for a clear view. Will be more optimistic after a break of that 200 ma

  9. Hi there first post here….Surely the DOW is worth shorting with a small stake? Looks way overbought and due a retrace? Read your posts here most days and have a little flutter whilst at work. Keep up the good work 😉

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