6642 resistance, 6571 support, dip and rise or rise and dip?

Daily Raff Channels
Daily Raff Channels

Good morning. Who knew eh, to stop the declines all Turkey had to do was double interest rates and cause an out of hours rise. Ha ha! On a more serious note the bottom of the 20 day Raff channels have held, having been hit this week on the Dax, S&P and FTSE, so we could actually get a decent rise again now. For today initial resistance is at 6640, 6660 then 6680 – nice pattern of numbers there!  Of course its Fed day today (7pm this evening UK time) and the most asked question of the week should be answered with regard to tapering. As mentioned yesterday it’s a coin flip. Taper and it means the Fed still think the economy is on the right track, which could be good for equities, don’t taper, and shows they were spooked by recent poor data and last week’s falls, thus is the “recovery” still weak. You can actually spin it any number of ways so rather than guess, its probably easier to wait till tonight! I do think we might be in for some bullish sessions now, with gold falling again and the daily trend lines holding.

Asia Overnight from Bloomberg

Emerging-market currencies rose, led by the lira’s biggest jump since 2008, and Asian stocks rebounded after Turkey boosted interest rates to stem capital outflows. Treasuries retreated before the Federal Reserve is forecast to cut monthly bond purchases today.

The lira surged 3.9 percent to 2.1682 per dollar as of 2:58 p.m. in Tokyo. South Korea’s won jumped the most in four months, spurred by a record current-account surplus, while the yen weakened versus all 16 major peers. The MSCI Asia Pacific Index of stocks climbed 1.5 percent and futures on the Standard & Poor’s 500 Index gained 0.5 percent. Ten-year Treasuries and gold fell for a third day, while rubber futures exited a bear market and Asia bond risk dropped.

Turkey’s decision was announced at midnight local time and followed an unexpected increase in India’s interest rates yesterday. BlackRock Inc. (BLK) said the moves will help restore investor confidence after a rout in developing-nation currencies and a $1.87 trillion selloff in global stocks in the week through Jan. 27. The Fed concludes its last meeting today under Chairman Ben S. Bernanke, with economists projecting a second $10 billion cut to its monthly bond purchases.

What happened in Turkey “was a really aggressive move and there will be ongoing pressure for other emerging-market countries to raise rates as well,” Nader Naeimi, the Sydney-based head of dynamic asset allocation at AMP Capital Investors, which manages $131 billion, said by phone. “It sets a precedent. You’ll get more of a clear separation between countries with strong foreign-currency reserves and strong current-account balances, and the rest of emerging markets.”

Fed Stimulus

The Fed said in December that it would begin to pare the pace of its monthly bond buying by $10 billion to $75 billion this month. The central bank will cut purchases by $10 billion at each of the next six FOMC meetings, with the program ending no later than December, according to a Bloomberg survey of economists that was published Jan. 10.

S&P

The S&P 500 rose 0.6 percent yesterday, rebounding from a three-day drop, as companies ranging from Pfizer Inc. to DR Horton Inc. reported better-than-expected earnings and data showed a pickup in U.S. consumer confidence.

Earnings

Facebook Inc., Boeing Co. and Dow Chemical Co. are among more than 20 companies reporting their earnings today. Of the 153 companies in the S&P 500 that have announced their results this season, 76 percent beat profit estimates while 67 percent exceeded sales forecasts, according to data compiled by Bloomberg.

FTSE Outlook

FTSE 100 dip and rise
FTSE 100 dip and rise

I am thinking a dip and rise today. The bulls will be buoyed by the 20 day Raff channel holding, and the emerging market panic seems to have calmed down a bit now. of course most of the action will take place this evening around 7pm and Fed time. We are back above the daily pivot at 6571, so I expect the dip to go there and then a bounce towards 6590 which if broken will open up 6640 and 6680 ultimately. If that pivot and the bottom of the 30 minute channel break, then 6555 is the next support then 6522. Back down at those levels would be quite good entries for longs as I do think we are about to get another climb up. however there are bigger falls coming I am sure, I still think that weekly scenario with the drop to 6000/6200 will come to pass by the end of Q1.

104 Comments

  1. good morning ,
    the dow has been a fair way off its highs for a decent time frame now , i think a lot of any tapering question is built in to the current price , , we had a dip below 15800 the other day , and i can see a push back up towards 16500 ish over next week or so no matter what the discussion is today as long as something in line with what has already been suggested is kept to and nothing absract is indicated. the ftse and dax remain pretty strong with the dow lagging a bit as always ftse moves with dow so i could see ftse back up to 6800 by mid next week . took a hit last friday on dow but long at 15850 and back into pos territory at min

    1. Thanks!

      I chose the wrong scenario for my arrows today, I thought dip and rise, seems it was rise and dip!

        1. be careful Jack, I was reading very interesting article about the raise being nothing more then dead cat bounce …

          1. No, I am staying out of it. Let the big money decide what they want to do. Generally I am rather inclined for shorts.
            But I had to go out today in the morning so didn’t trade just not to mess it up again.

  3. Can someone please explain this to me… if the US raise interest rates now that would be consider bad for the economy but if the emerging market of India and now Turkey put them up that suppose to be by some magic good?!!…lol… I must have slept threw all the economics lectures I had at University or my professor was just talking rubbish…lol…lets now wait for Brazil, Russia, South Africa and few others to do the same and you will see how fast that lovely French women from IMF will go in a front of cameras and start talking about currency war and slow grow…Lets not mention the world recession…lol

  4. No matter what the feedback is this evening it will be viewed as bullish IMO. It always happens. The uncertainty brings a fall then pop

    1. I am not so sure, the make up of the voting members has now change and if they come up with 15B cat you will have sea of red…lol

      1. Yep i took FTSE 6588 and DAX 9440. Not sure whether to play it as a quick scalp or whether we rise into FORMC now? mmmm

  9. I closed a long earlier @ 6630 and was kicking myself for a while… now it’s back below my entry level

  12. What are we saying… ? If they taper it goes down, If they don’t in goes up ?

    I think this market is looking to go down

    1. in my opinion it will go down, we haven’t finished just yet with the correction or pullback, call it as you like…what we had yesterday and this morning was just dead cat bounce (as I mention this earlier in the morning, look above)…

  13. I started off mildly bullish but couldn’t find any price action to tempt me in – thank goodness. Now mildly bearish but not in as again I want to see it reject any attempt to rise. Seems to be going through all support levels at the moment.

    Have no idea what the fed will say and no idea how the market will respond so in no rush to get in – I dont think the market is going to like all this rate rises in emerging markets – lots of scope for nervousness and contagion! So sit back and let the market guide me

    1. so 2x at 6640 and once (carried over from yesterday 6579)…
      annoyed at that short at 6579, never thought it wud shoot to 6600+
      lets see im still holding

      1. Hashmash. How is your indicator doing? Is it strongly short? Do you expect any drop on FOMC today?

  16. … the market is having one last go at telling the FED what is going to happen if it dares to taper 🙂 game of chicken going on

  17. Technically this markets are going up…it’s again in the base. Unless I see some big pop up before FED between 14:30 and 19:00.
    Dec.18 markets reacted to the upside for tapering each month. So, unless there is change in policy, do not see this coming down.

    1. and big pop up need to go at least to 16170 in DOW, which I did not see in overnight.
      What I saw was a big warning for an coming upside move

  18. It looks like it is going down again – hadnt noticed how much the Dax and Dow are currently down. Be hard for the FTSE to hold these levels if this continues. Looks like yesterday was a blip

          1. Still looking at 6460 by month end for a medium term long. Think it will go lower in the shortish term – remaining of this week and for the most of February. But will end up higher at the end of April than it is today.

  26. … average blast through the 200DMA average for the last 3 mini crashes last year were circa 175, on that basis this thing has got to get to at least 6375 before any sign of an upturn!

  29. Building my short every 10 points – average 6532. Could get interesting. Need to figure out what to do before the fed meeting. Going to be a long afternoon!

          2. I had long 15803 by some bad luck entry, added at 15766 and others which closed but kept 15803 (averaged for b/e exit was 15792.5) so I stayed put until it reached 15825, there I got out as I had my losses back so at least sorted. Don’t know why I starting Longing so early. First experience on Dow, I’d say – interesting, and heart pumping experience.

  32. Shorts played out very well for me.. still holding.. hopefully a little bounce so i can add more.. i am looking for 6300

  34. DOW trans around mm50. Seeing a huge upside next days and possible resume of uptrend. With another possible short squeeze. Seeing trade websites with a lot of short trades

  35. Ftse turning into an animal lately
    Didnt trade today. But will go heavy depending on the fed announcement
    No taper- huge upside
    Taper- 6300ish

  37. .. have i got this right, if the taper kicks in we are going to see a massive sell off? even though there will be another $65billion still to go, and at a rate of $10billion every couple of months, so a potential 500-600 pts each taper wow! suggests equities are not the place to be eh 🙂 of course it could all be a wind up, the USA is getting stronger (ignore month/month crap) yet they face a sell off that will infect the world …… total cobblers buy the dips but slowly 🙂

  38. i am now in quiet heavy on shorts….
    any sign off bulls at annoucement, ill close immediately and take profit, worse comes break even.
    lets bring the bears baby!!

  39. Regardless of what happens over the next few hours, this is going to be a big swing, up or down, I’m sitting out, but favouring it to drop.

  41. If Fed continues its planned course of action, and tapers, does that not suggest that recovery still in-tact broadly speaking, and therefore no downward knee-jerk from FTSE/Wall St?

    1. wouldnt say there wud be a big one, i think a lot of it is already priced in…but if they do taper, def a spike.

  44. im still holding hardcore bearish views. i had to close B/E, dont wanna even take 1 point loss if im trading on such an annoucement

  45. well that was a bit of a an anticlimax – hardly any movement at all – maybe off a bit. Will stay on the sidelines till tomorrow to see which way we are heading

    1. hardly any move?
      Did you not notice that big drop today?
      They obviously knew what was going on before us.

  51. Back to the focus on growth tomorrow. German unemployment figures, euro sentiment, US GDP and jobs data. Could be the spark to take us up again.

          1. I like to trade big on annoucements because within a second or 2 u have such a wide distance for B/E, thats if the market moves..
            if it moves against u..well thats why i only play this risky strategy when my position is in the money (decent amount)…worst outcome is i lose the UNREALIZED PnL

  54. … Don’t be sucked in with the fall and pullback crap, this will dump towards the close, that’s e time for a long for a few says 🙂

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