6696 support today – gonna bounce??

Good morning. It started off fairly flat yesterday morning with a slow drift down to the pivot area at 6730 before a decent climb back to the 6765 area. Then the bears appeared virtually at the close, and took the FTSE all the way down to the bottom of the daily channels. Unfortunately yesterday’s shorting area at 6770/75 wasn’t quite reached. The US sold off quite sharply as fears rose over valuations, a fear that has led to a weak overnight Asia session. The bigger picture news mentioned below in the Bloomberg section fits in with my 2014 outlook which was for limited upside, possibly reaching 6850/950 before a significant fall to the 6000 area about mid-year. I agree that shares might have limited upside having had a good run in 2013, and I still think there are significant hurdles to overcome before the recovery is locked in. We are not there yet, in my opinion. The US earnings reports will make interesting viewing to see if that share price rally was justified, starting with JPMorgan today then more banks on the 16th.

Asia Overnight from Bloomberg

Asian stocks fell, with the regional benchmark index on course for its biggest loss in more than three months, as it paced the largest drop in U.S. stocks since November amid concern over valuations.

The MSCI Asia Pacific Index lost 1.4 percent to 138.77 as of 2:18 p.m. in Tokyo, heading for the biggest loss since Sept. 30. All 10 industry groups on the gauge fell, with more than three stocks dropping for each that rose.

“Investors are starting to ask the question that strategists and analysts have been asking since October: Has the optimism that drove 2013 translated into earnings?” Evan Lucas, Melbourne-based market strategist at IG Ltd., said in an e-mail. “The reaction from Wall Street overnight suggests some are finally asking this question for real.”

The Standard & Poor’s 500 Index lost 1.3 percent yesterday, the biggest loss since Nov. 7. Japan’s Topix (TPX) index slumped 2.3 percent today as the market reopened following a public holiday. Japan’s current-account deficit widened to a record in November as imports climbed, data showed today. The yen snapped a three-day gain after touching a three-week high against the dollar yesterday.

Bianca Trends
Bianca Trends

U.S. Futures

Futures on the Standard & Poor’s 500 Index were little changed today. The S&P 500 has dropped 1.6 percent in 2014, the worst start to a year since 2009, according to data compiled by Bloomberg.

U.S. stocks extended losses yesterday after Federal Reserve Bank of Atlanta President Dennis Lockhart said the U.S. economy is on “solid footing” and he would support continued cuts to stimulus. Lockhart doesn’t vote on policy in 2014. The Fed, which next meets Jan. 28-29, last month announced a reduction in its monthly bond-buying program, citing a recovery in the labor market.

The Asia-Pacific gauge traded at 13.2 times estimated earnings as of yesterday, compared with 15.4 for the S&P 500 and 13.9 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg. The MSCI Asia Pacific gauge rose for 11 consecutive days through Dec. 31, while the S&P 500 index ended last year at a record high, having climbed 30 percent for its biggest annual rally since 1997.

“Shares rallied toward the end of last year without much of a correction and that makes me think the upside momentum for markets is limited this year,” said Kenichi Kubo, a senior fund manager at Tokio Marine Asset Management Co., which oversees about 5 trillion yen ($48 billion). “Judging from valuations, markets will struggle to rise further.”

FTSE Outlook

FTSE 100 prediction
FTSE 100 prediction

I don’t think we need to be quite as bearish as yesterday’s fall in the US would suggest and we are now testing the bottom of the daily Bianca channels. On the FTSE a dip below (and hold below) 6700 would turn the tide bearish, but it actually held up quite well last night while the Dow sold off. As such a knife catch at around the 6700 area with a long to hold for 6830 might actually come good! I have support at 6706 and 6696 so a stop on any longs at around 6676 should be ok, as that is just below the lower support level at 6679. Below that the bears will be targeting 6613.

So, cautious long at 6700, but if it breaks then I feel we are looking at a drop to nearer 6630. The reason I am thinking that this 6700 might hold for the moment is that we aren’t actually testing any of the Raff channel bottoms on FTSE, Dax or Dow. If that support does hold then today’s pivot at 6750 might get hit, especially if JP Morgans results are good later on. Dow is also nearing support at 16230/40.

186 Comments

  1. Opened a long at 6709, then later realised i had an order for 6705 long that activated accidently! Only found out after.
    6700 was a good support level.
    Dont agree with what that atlantla president said.
    US and UK are in a huge debt crisis, as is the rest of europe.
    And ultimately the fed has to think about not just tapering, but selling 4 trillion of bonds that it has on its balance sheet.
    It looks rosy now, but with the eastern economies on overheat and due to burst at some point aswell, its all still yet to come.

  3. The t-line at 6731 daily chart will not be crossover imo. That gap down in the open just says everything and the weak rally yesterday, also.
    We are again, definitely in a slow drift to the downside, as last year.
    We just need to be patient to catch at least the reverse upside, when it comes. New lows are coming

  4. PMS looking for support on the DOW at the 16180 – 16000 level which is close by when you think we sank 200 points yesterday. And with earnings season kicking off today I see a turn around very close. So for me the ftse has not much to dip if it can keep climbing before DOW opens. Looking to short DOW then its up and away soon

  7. Jack IMHO I think the Dow has further to drop it might happen before 4.30 or after or not at all just my opinion liking at charts. Jp Morgan reporting today ahead of the bell

  8. It’s worth remembering that the rise in the ES & YM is being driven by Europe, it’s still only 5am in Chicago at the moment, be interesting to see how they open.

    1. I can’t make my mind up today, was about to put on the same trade but I have a thought in my head that makes me think it’ll push a little higher! Good luck with it. 😀

  14. Something tells me Morgan might disappoint that’s why the sell off yesterday by those on the know…!
    Tight stop at the moment

  16. This morning’s rise in the FTSE means that it stays stuck in its groove in the meantime, e.g., the 1 hr. December 27 ϵ-channel. It bounced off the lower boundary again, which provided support at ≈6700. At this point, the Dow has fallen through the floor of the corresponding channel – so it’s looking more bearish than the FTSE right now.

  19. Jim D thanks although that double bottom on the FTSE keeps playing with my mind.
    As Jim says am bearish on Dow which would tie in with not so good Jp Morgan results.

    1. Wow, the chart on Dow really look different from Ftse. It has 61.8% retracement though, in theory it should pull down. But it’s been such a vigorous drop and the bounce looks like DCB. But who knows what Ftse will do.

  22. I’ve been looking to this índice since last summer and my perception of it is that after a strong uptrend, when it starts to stall, then any upside movement is merely a bull trap. I do not see any new highs until we see a deep and a full bear sentiment.
    The best outlook I have is one of those movements last year, when it gone slighty deep for another turnaround at new slighty highs, and then new lows

    1. Yep markets havent budged – now what? I hold no position but looking to build shorts only. We’ve bounced off the pivot. Is that the high line for the day ? Maybe ill wait till post 230 unless something dramatic starts…

  24. FTSE as I have been reading is not at all more bullish than DOW.
    Is just happens that DOW have been in a huge ride to the upside in the last months and FTSE has just been more down to earth. Nothing extraordinary. Many people forget that FTSE still is below May’s highs from last year.

      1. I am sure it will end sometime this rally, it cannot be forever. If I have to I will deposit but I will hold.

        1. Too much money staked. Need to win. I need only one win and I will get it now. I lost too much last week because of these stops. They take money but I need to win. I will go down eventually, it cannot go up forever.

          3. Be carefull… It can go up forever. It doesn’t have to come down, and above all else, you money can run out before it turns. Only trade what you can afford to lose!

          1. I hope I won’t need them. But I will keep them in account for now. Last time it took me ages to deposit, didn’t want that to happen again.

  33. Hiten great trading controls. I couldn’t have a stop at 6800 just because then more than ever I would want to be averaging up which I accept is poor. I’d rather go lower stale and ride out the trend. Poss poor trading from me yesterday have back all the good work this year.

  36. FTSE/4hrs. is right back at the upper boundary of the current standard error (ϵ) channel. What’s more, the Stochastic Momentum Index (SMI) is signalling more upside at this unlikely point. Now that would be a surprise! 🙂

  37. ok boys, going against my traditional strategy here, and into my intraday strat..which i havent played with in a while, shorted quiet a bit lol..
    HOPE I DONT COME BACK AND SAY …”FK! made a wrong trade due to boredom!”

    1. this trade purely based on the retreat from the 1600 bar yesterday, also RSI and STOCH overbought…AND the other reason to this short is because of the short range we have had for last several days! Shorted at 6759.3

      1. Also, before US was in the bull region (on my indicator) and now has dropped off. Soo this builds up on my confidence that we won’t see a jump up on US open.

          2. but jack learn to take “SMALL” losses, if u survive this then its purely because u got lucky as the markets in the range, u don’t know if this up movement will break the range, on my indiciator it is very slightly bullish, main reason im going against it is because i think this market still in range, but im SH!T in intraday moves lol

          3. I need luck, just pure one time luck. Just this time. However I agree with what you are saying. See what the future holds.

    1. Are you expecting a reverse now back down ?
      or are you waiting for a better entry point from here ?

      1. pretty sure whether short or long, not gonna be enough profit to boast about lol..market too range bound, can blow either way, not worth the trade in my exp, but this is my 2nd trade i think in last 2 1/2 weeks

  41. Yesterday there was sell off on DOW, usually day after sell off market tend to bounce. If DOW does bounce, like FTSE, on open then FTSE in 6800 area?
    Lets see. GL all.

    1. why not take last 10 years daily data, put it in matlab, heck even excel…and see how many times that happened?
      Pretty sure if u are saying it from on top of ur head then thats enough for me to bet in the other direction (purely based on psychology)

  43. Been out enjoying the sunshine, this looks like it wants to retest the recent highs.. and maybe more if the US rallies hard.

  44. Sam, ‘markets after a sell off do not tend to bounce…’, is an assumption that can cost you. DOW, took a right hammering yesterday, we did not see a sliver of bulls yesterday…

    1. Agreed Ahwab. I have no position right now and I dont want to jump in now. Waiting on sidelines for DOW to open, shall ride the trend, if one occurs.

  46. 1500, if ftse not below 6750, im cutting my position by 50% (assuming it doesnt rise to a point where ive had enough, short entry is at 6759.3)

  47. Cautionary tale – back in 2004 I had a large position on the FTSE (short).

    I had the chance to get out for a modest loss of about £600.

    I held on thinking it MUST go down…

  48. Last two weeks havent been a nice time to trade.
    Thankfully kept trades to a minimum during this time.
    Currently short at 6765
    Closed the long at 6740, regretfully

        1. However I reduced my stake when one of the trades went b/e. Trying to save money in case it will continue climbing for a better entry. Now short 6715

  53. Have closed half of my dax short for healthy profit move stop too break even on other half will now let this run for rest of the day

  57. closed at +1 profit…better something than nothing…
    back to being on sidelines..indiciator starting to move to bulls

  59. I would hold the 6715 position jack.
    No point closing it yet.
    It will fall to 6700 soon. Its been hovering at these levels for the past two weeks, doesnt look likely to change soon.

  61. Ive added to my short. FTSE doesnt want to go above 6760 area so a repeat of last night would do me very well (as if!). My average is 6750

  64. Dow/4hrs. has support at 16250 and the index is back just inside the current channel’s lower boundary. So, a move back up to ≈16400 seems to me quite likely. If so, this should support the FTSE above 6750 in the short term.

  66. This recent pull back on the FTSE isn’t much to shout about is it ? It hasn’t even got near the 50 dma (6655)…

    Feels quite bullish at the moment (I am flat)…

  69. Consolidation in SPX for now. More downside I expect. If FTSE closes above 6731, then something is building for upside, but cannot figure out what exactly. This British are very tricky. They prefer to stay in known levels, very down to earth. Breaking to new territory is more difficult that giving birth to a child.

      1. YEah, as I said earlier, very tricky. I can see a false breakout of this bull flag hitting those imaginary numbers told in last months and then when things seems very bullish and confident, will gone for a sell off and slow drift for downside with some bounces in the middle.

        1. Saying that…impossible a swing trade in FTSE until a very deep low. Till then scalp, scalp, scalp.

          1. Because if these was the DAX I could see a breakout as a bullish sentiment, but in FTSE things are not the same, starting from this website and the comments.
            Any new high price is seeing as a short strategy.
            Reading that for months.
            THis is my own perception.

    1. For the last few weeks Gold prices reach daily high during asian hours and drop to daily low during US hours. Looks like Gold is moving from the West to East!

  75. Because if these was the DAX I could see a breakout as a bullish sentiment, but in FTSE things are not the same, starting from this website and the comments.
    Any new high price is seeing as a short strategy.
    Reading that for months.
    THis is my own perception.

    1. My feeling is that many are short the FTSE, more & more feeling pain, eventually they capitulate & send the index higher than the Oct high… that’s why all dips are bought.. as traders gratefully close.

      After that we can have a proper fall.

      But I could be wrong.

  76. FTSE cash closed 6766.86, off the high (but not by much).

    Kudos to those who bought the early lows & hung on.

  79. Very bullish close with 3 consecutive closes above t-line , after 2 below in these consolidation process.

  80. FTSE is up less than 14 points for 2014, so if you have made 14 points or more this month you have outperformed the market…

  81. Ok, a bit more up movement and i buying moderatly heavy, prob will start buying around 6800 level.

  82. I mentioned earlier, at about 1:30 pm, in connection with FTSE/4hrs. that “ … the Stochastic Momentum Index (SMI) is signalling more upside at this unlikely point … “ That signal is much stronger now and the index has just broken through the upper boundary of its channel. 6800 is beginning to look like easy game. 🙂

  83. 😀 look at this british comment :
    Views on FTSE breaking 6800?? Such divergence with US at the mo. Surely, it’s upon us??

      1. Moreover…how can someone put money to work with such overall sentiment in these indice ?

  85. Does anyone have a site that shows what dividend is to be applied to FTSE on what days? Im led to believe it is usually a wednesday?

    1. Hi Marco, The SMI is a standard indicator available in ProRealTime, and other programmes no doubt. In this instance I applied it to the FTSE on a 4 hr. timeframe. Does that answer the question? Cheers.

  87. So… the other leg up I mentioned other day is coming, for activation of bearish divergence between price and RSI in 4 hourly chart. Is still valid and if it hits 70RSI, than lookout for selling. 6790 was my number for topping, but now after all that drops in between I’m looking for 6812-6820 for topping in short term

  88. So frustrating to see the Dow back only 30 points off my long entry yesterday. Must have sold pretty much at the low this morning. Went long ftse and closed at 6725 as I thought it may pull back. Went short with an average of 6762 thinking it was an amazing entry and here we are. All the while I still know of nothing that can create or dispense with so much money in equal measure! Got to love it

  89. Well took a small loss on my dax short today still think we will see another run down to 9400 on this indice, 185 points from low too high in one day amazing.

  90. Hi Jim
    As I am away from my desk alot I use the iPhone IG index app with the SMI set to default with settings at
    %K periods – 14
    Slowing periods 3
    %D periods – 5

    are your settings using these figures or diff. That’s what I was after cheers

  91. What happened to the ‘valuation concerns?’ I can’t believe I have been bullish all jan to now be looking at a short. Need a snap back sell off tomorrow. 6800 so close and I fear will breeze straight through like last time. Will not close this position though. I always get the fear.

  92. I get the feeling some of you guys are simply guessing with gut feel on your positions? You know that strategy never works don’t you?

  93. Al
    What is your thoughts on the Dow and FTSE
    Mine is bearish short term on the Dow for pull back to 16180-16000
    Whilst FTSE is bullish but buy into any pullbacks

  97. Whatever the overall direction it is going to be volatile over the next week or so so should provide some good opportunities.

  101. Just used that opening drop to close my short -as I didnt want the market to run away north. Still slightly bearish but will stay on the sidelines until I can take a view what is going on! Will be interested on Nick’s views. Real tricky this year so far – one day we are selling off hard and the next the opposite – it just wont form a decent trend either way at the moment. Maybe the US earnings decision will make this happen

  102. I don’t know when this rally will run out of puff, the Oct high around 6820 would be the first target.

  104. NO swing trader in this index, that’s for sure, until we reach those catastrophic numbers at 6000 😀

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