6575 still resistance, rise stopped there yesterday. Double top on it this morning?

Good morning, well how many times have we dropped in anticipation of tapering, then when we do taper it rallies? Of course they are now saying it done that as tapering means the economy is improving sufficiently to support itself. However, it still having $75billion a month pumped in! So, tapering started earlier than I thought, but only by a small amount and the Fed are keeping interest rates low for the foreseeable future. I am sure you all saw the reaction yesterday, was certainly a wild ride if you chose to trade it. The rise stopped at the 6575 resistance area mentioned yesterday, though as the news was released we dipped a bit further than I had plotted, down to the 6450 area where the bounce started.

Raff Channels
Raff Channels

In the trade plan for yesterday we had a short order for 6575, if you are still running that (assuming you set it up) I’d look to run that for a while today. The initial target was 6500 posted yesterday, which is today’s pivot level in fact, but it would be a good idea to get stops to breakeven and trail them. The earlier long, which was risky, and the SMS one ended up getting stopped at breakeven. Am not too worried as its always a bit of a gamble trading around news.

From now till the year end, I still think we will see a buy the dip Santa Rally kick in and am optimistic for the 6800 year end.

Asia Overnight from Bloomberg

Asian stocks rose after the Federal Reserve expressed enough confidence in the U.S. labor market to taper asset purchases while still promising to hold interest rates close to zero.

The MSCI Asia Pacific Index advanced 0.2 percent to 138.56 as of 12:01 p.m. in Tokyo, with more than two stocks rising for each that fell. The Fed announced plans to cut its monthly bond purchases to $75 billion from $85 billion, taking its first step toward unwinding the unprecedented stimulus put in place by outgoing Chairman Ben S. Bernanke to help the economy recover from the worst recession since the 1930s.

“It’s a win win for markets,” Shane Oliver, who helps oversee $131 billion as head of investment strategy at AMP Capital Investors Ltd. in Sydney, said by phone. “They are more optimistic on the employment rate and the economy while still keeping loose monetary policy in place with low rates to support the economy. We’re happy to stay overweight equities and if anything buy a bit more.”

The Fed said its benchmark interest rate is likely to stay low “well past the time that the unemployment rate declines below 6.5 percent, especially if projected inflation continues to run below” the Fed’s 2 percent goal.

Bernanke Comments

“Reflecting cumulative progress and an improved outlook for the job market, the committee decided today to modestly reduce the monthly pace at which it is adding to the longer-term securities on its balance sheet,” Bernanke told reporters in Washington yesterday after concluding a two-day policy meeting of the Federal Open Market Committee.

The U.S. Senate yesterday cleared and sent to President Barack Obama a $1.01 trillion budget deal, lowering the U.S. deficit over 10 years and easing $63 billion in automatic spending cuts. The plan keeps in place about half of the reductions known as sequestration for next year, and about three-quarters of the planned cuts for 2015.

Futures on the S&P 500 Index dropped 0.2 percent today after the equities gauge surged 1.7 percent to a record 1,810.65 yesterday. The Dow Jones Industrial Average soared 1.8 percent to 16,167.97, also a record. The cost of protecting against equity losses as measured by the Chicago Board Options Exchange Volatility Index slid 15 percent, the biggest drop in two months.

FTSE Outlook

FTSE 100 possible dip and rise
FTSE 100 possible dip and rise

So, onto the FTSE. As mentioned above today’s pivot is 6500, a level that feel quite far away after such a strong rise yesterday! If the 6575 area holds as resistance for the moment then it likely, though as you can probably tell from the tone of this email I am bullish now for the year end and buying the dips is probably the sensible thing to do. It will be even better if the FTSE can break 6575.  If it does then 6640 is on the cards. The reason why I think they MIGHT be a little pull back first is that we are testing the top of the longer term daily channel (20 day Raff) and 6575 is the top of the 10 day, so a little pull back, bit of consolidation, to create a spring board to push higher tomorrow and next week would be ideal. That said it can of course break out of the channel, retest and then climb again. A breakout target would be 6640 then 6720.

There is still a risk of 6200 until prices can get above 6575 though.

After yesterday we will probably still get a bit of volatility today, though whether it dips as far as 6500 I am about 50% sure of, as we may see a  bit of a gap close initially as price retraces back to yesterdays close level at 6492). Be a good place to buy the dip though!

107 Comments

  1. Got two ‘flags’ lol 🙂 today… one to LONG the DAX (one indicator)… it’s only up 145 points already 🙁 and one to LONG the S&P 500 🙂 hmm 🙂 Kind of obvious where these ‘flags’ are coming from lol 🙂

    2. I don’t buy the S&P 500 indicator either lol 🙂 , looks kind of false given the massive jump 🙂 but looks like a lot of room at the top for shorting. But you never can tell with these things… lol 🙂

  3. Just amazing how the price reacts to create an even wide parallel channel. Nick was right on this rise as the 1st wave was quite pushy so the 2nd was quite good. Now – the 3rd wave or none? Who knows if it will continue pushing to 6660 or collapse now.
    Heh, I was right yesterday thinking it will continue dipping, I should have bet on it.

    1. But if you HAD bet bet on it Jack, you know what would have happened 🙂 That is the way with these things lol 🙂

  4. The Hindenburg Omen signalled again last week on the DOW… It gives 3 month window for 75% it will give 5% correction or 25% of a 10-20% correction…
    Regarding the FTSE we are in daily up trend, so buy the dips as Nick says…
    Something to add Hong Kong was up 1.5% last night, only to finish 1.5% down…

    1. Thanks Jasper..I agree with you..big correction coming..I expect a 15% correction before the 3rd qtr next year..why? because the economy is doing so well! 😉

      1. Yep..picked up on the HK market this morning..dropped some 700 points from last night’s ‘high on the tapering exuberance, only to hate it a few hours later when the market closed!! Profits booked?? 🙂

  7. missed that crazy jump yesterday 🙁 i cant see ftse shedding 50 points atm and dropping to 6500 but if it does…then i will be targeting 6518/6507 as potential entry points perhaps? gl trading 🙂

    1. Easy John…I have a small paper loss as well need about 70 points..Looking at the Fib levels … easy 30% retracement in next few days, if not today, so 30% of the 292 dow up move is about 87 points.

      1. thanks ray …closed out half my trade this morn which where ones that where not making much of loss ….bought in last night when dow was roughly up 200 points ..GL

  9. Thought I’d start an out of date article for you know who … 🙂

    BIG BEN GOES OUT ON A HIGH
    After brief confusion, markets reacted ecstatically yesterday to outgoing Fed Chairman Ben Bernanke’s vote of confidence in the robustness of the US recovery by cutting asset purchases by $10bn per month. None of our highly paid analysts foresaw this combination of outcomes so with immediate effect we are announcing … … (2 minutes ago)

  10. Took a smallish long at 6560 today just in case this rise develops into a full santa rally. Smiled when HL out out a note today saying that we had had it today – what a laugh, given we are still well down on the month. So far seems to be holding up well – was expecting more of a sell off today from the opening so maybe we can head north for a few days now. We have a lot of catching up to do compared to other indices – anyone any idea why we have been lagging so far back ?

  12. For those of you thinking of buying the Dow at these levels because of the Santa rally/so called ‘strength of U.S. economy/Ta’pering fears gone..just wanted to say ‘one swallow doesn’t make a summer!! Yep..I am short 😉

  16. im not in the market anymore close rest of my long position at around 6574 last nite.
    Strategy still showing bearish so lets see.

  17. luke just be carefull of a push back up to 9375 , before a retracing can see 9360–375 when us comes on , then perhaps a sell off by end of play tommorow , the weekend will create a breathing space to create a stance for early next week trading

  18. Thanks Haysbusa got caught with the Dax yesterday with the big push up but still believe that the Dax is due a good size correction before the next leg up to 9800

  19. I gave up trying to double guess data and how the market reacts to it years ago. I trade seasonality as it suits my psychology and trading discipline best.

    For example – going back to calling the start of the Santa Claus rally…… this year is the same as 1985, 1991, 1996 and 2002 in that the last full week before Christmas commences on Monday 16th. In all those years the second half of the month was positive and with the exception 1991 the first half negative. Even in 2002 where Dec had its highest drop in 30 years – 229 points the second half was still positive – 62 points.

    Coincidence and luck? Yes most probably but no more luck than predicting the market would rally after tapering…….

  20. Santa claus is coming to town… Santa claus is coming to town.. Santa clause is comingggg toooo tooowwwwwnnnnnnn!! loooool messing guys

  27. There you go John…the 30% fib retracement down on Dow..bang on…I closed my Dow loss..hope u did too. Some on here were saying din’t shirt..lol…yeh right…:-)

    1. didnt quite reach my break even still 150 down maybe waited to long …… will see ……had good long on eur usd at minus 25 working well all day gl

  29. Am shorting the Dow rallies..waiting for it to hit it’s high’s again..loaded up now Dow loss removed…

  30. Come on guys buy the Dow..the U.S. economy is stellar..Santa rally and all that. I need you guys to feed my shorts, a bit like Turkey’s voting for Xmas! 🙂

  31. Am patiently waiting for a decent pull back on the FTSE to add to my position but they are getting shallower. However it doesnt seem to have the legs to push on from 6660….. Guess I will have to keep waiting

  33. And is if by magic we are off! Will it get through the 6575 level. Looked at Dow – doesnt seem to be doing that much

  34. Ray I am feeding you! Not selling for another 300 ftse points! buying more at 6500 but feels a long way away. Tomorrow will be interesting…

    1. Since NOV.7, indicators starting to show Bullish FTSE. A few more hours until tomorrow and see if it holds.

  36. X2WLT..Your FTSE trade doesn’t effect me…I am shorting the Dow rallies..not the FTSE..too dangerous to short FTSE is not at high..

  37. The internal dynamics of the Dow and FTSE are very different at the moment..2 distinct markets..given their price levels…Short US mkt at high’s or near high’s…and just monitor FTSE and trade accordingly until 6800 level is reached..

  44. I remember once that happening with DAX with a target I had. After closing position, DAX gone 2-3 more points up and then a crash before the Japan earthquake

  45. So is that the 6575 resistance broken or do we need to come and back test it to be sure? Looking promising for the longs (which I now am)

  51. Dow/daily now squarely in upper section of strongly rising ϵ-channel. Good chance of it pushing up to close on upper boundary. FTSE meanwhile is out of sync, finding itself still in the lower segment of a barely rising channel – ≈6750 should be achievable though.

  53. I’ve taken +20, and gone short 6590 for a potential pull back overnight/tomorrow. Placing stop at 6635

  54. Fun and games at play this morning…FTSE just touched 6600 on the nose…6599.9 to be precise..oh well..some savvy traders went long knowing that they were safe to do so…and make profits up to the round stop level number of 6600…that’s why you never set stops at such key S/R levels if you were going short…better 6612 or higher…

    Just went short at 6600 £5pp…to close morning gap of 20 pts..plus another expected extra 10 point drop..so minimum hopefully 6570..but think will easily touch 6550-60 level..Let’s see..

  55. Off to bed…knackered!! Set limuts and stops…don’t forget GDP figures out for both Botswana and Papa New Guinea…will be market movers!! Seriously..for U.K. and U.S GDP out today..catalyst to sell off and book profits?

    As I mentioned yesterday Quadruple witching day today..expiry of stock indexes, futures, options…huge volume and volatility expected..and even more so today because Facebook is being added to S and P..and both Nasdaq and S and P are being reconfigured..

  56. Bloody hell..just got stopped out with huge 60 point spike of 60 pts at 6600 level…hit 6658!!!!..Small loss…never mind…

  57. Bet some of you lot will be shocked that your stops, however wide, if you were shorting got hit….spiked to 6658 on a fraction of a second..then back dowm again…pure stop hunting..

    ..Dow didn’t flinch….market makers…synthetic prices..they make it themselves after trading hours…all fun and games…:-) Chow..time for sleep..don’t forget GDP UK and US

  58. Just rang IG to get an explanation for the 1 second spike from 6600 to 6658.and back to 6600..they simply said..is a thin market at this time..”It got blown out”..realised dealing with a dimwit and left it at that…at this time you go through to their Australian office..not London..not open yet…

  60. Wow, I am very lucky. For some reason, that spike you are talking about has not triggered my stop at 6635.

  61. Just re-entered my ftse short at 6600…not taking this nonsense!! 60 pt nanosecond manufactured spike!! Will monitor till just after open then leave..

  64. Just rang Intertrader.they can’t explain it satisfactorily either.they said was a spike..someone bought FTSE and caused the spike..??!!

    Seems all the brokers close ranks in such circumstances…a bit like a cartel..operate together..

    Hashmash??? You promised you were going to be on the sidelines..you and your mini hedge fund causing mini tsunamis 🙂

  65. I feel for you there. Pure scam. Disgusting isn’t it. I didn’t see it but saw on IG a high of 6658?!

    1. Thanks..nothing can be done. not the first time in my 5 years of trading…they don’t refund..asked many time before..also stops in such spikes are useless..they don’t get hit..only at the end of the spike and within a nanosecond back down again..with a lower NET BALANCE! Happens with forex a lot on key economic news as well..

  66. I am with IG. Very thankful I was not stopped out. Spoken to a few others, and everyone who seems to be on IG were not stopped out

  67. Ray I would really push this with them. As you say the other markets did not move. What purchase could cause a 60 point instant 1 second move. Horrendous

  68. It’s amazing that when the market moves in your favour and you try and close a position you get the delay then market price not availablez The other way and it’s triggered. Where was their slippage there?!

  70. I see the 20 point gap I mentioned above got filled… 6600 to 6580….dogs stopped me out..otherwise would be in the money now 🙁

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