6865, 6840 support, 6892 and 6905 resistance

Good morning. It ended up being quite a flat day yesterday, though the FSTE did close at the highest level for 14 years, and still looks like it wants to go a bit higher. That said the short yesterday at 6875 went down to target at 6859, and even hit the secondary at 6849, before bouncing back again. The bulls are certainly the ones in control at the moment. The daily trends are tracking up still, and the indices seem to be shrugging off most things that might cause an upset at the moment. Interest rate rises are still being mooted as I mentioned yesterday. When you do start seeing the headlines in the mainstream media about the FTSE hitting highs and asking “is now the time to go back into the stock market?”, its exactly the time you should be getting out as the smart money has already ridden the rise. So, though there may yet be a push to 6900/6940, I don’t think we are on for a long bull run just yet.

Asia Overnight from Bloomberg

Bianca Trends
Bianca Trends

Asian stocks rose, with the regional benchmark index extending its biggest rally in seven weeks yesterday, as U.S. equity gauges held at record highs and investors weighed earnings.

The MSCI Asia Pacific Index rose 0.3 percent to 139.70 as of 12:07 p.m. in Tokyo with all of its 10 industry groups climbing. The measure jumped 1.1 percent yesterday, the biggest advance since March 24.

“The U.S. economy and corporate earnings are strong, which are reflected in that stocks haven’t fallen from record highs,” said Takahiro Nakano, a Tokyo-based senior strategist at Mizuho Trust & Banking Co., a unit of Japan’s third-largest bank by market value. In Asia, “earnings have been good, but companies are conservative about their outlook, making it hard for investors to raise hopes.”

Among companies on the Asian gauge that reported quarterly results from April 1 through yesterday and for which Bloomberg had estimates, 52 percent beat profit expectations, according to data compiled by Bloomberg.

Regional Gauges
Japan’s Topix (TPX) index was little changed. South Korea’s Kospi index rose 0.7 percent.Australia’s S&P/ASX 200 Index fell 0.3 percent after the government released its budget, in which it raised taxes on high-income earners, cut spending on welfare and health, and outlined public service job losses.

New Zealand’s NZX 50 Index added 0.1 percent. Taiwan’s Taiex index advanced 0.2 percent, while Singapore’s Straits Times Index increased 0.9 percent as the market reopened following a holiday.

Hong Kong’s Hang Seng Index advanced 0.2 percent. The Shanghai Composite Index fell 0.2 percent. The Hang Seng China Enterprises Index of mainland companies traded in the city added 0.4 percent. As of yesterday, the so-called H-share index had slumped 13 percent since Nov. 18, when it jumped the most in two years after the Communist Party outlined reforms.

While the November policy package led Goldman Sachs Group Inc. to raise its recommendation on Chinese shares to overweight and spurred Citigroup Inc. to predict returns of at least 20 percent in 2014, investors have shifted their focus to the depth of China’s economic slowdown.

Instead of boosting stocks, the government’s emphasis on reform may impede gains as policy makers downplay the importance of short-term growth, according to CLSA Asia-Pacific Markets.

Record Highs
The Standard & Poor’s 500 Index added less than 0.1 percent and the Dow Jones Industrial Average rose 0.1 percent yesterday, both extending all-time highs. Futures on the S&P 500 climbed 0.1 percent today.

U.S. retail sales increased 0.1 percent in April following a revised 1.5 percent jump in March that marked the biggest gain in four years, Commerce Department figures showed yesterday inWashington. The median forecast of economists surveyed by Bloomberg projected a larger advance last month.

“The data suggests that improvements in U.S. activity is likely to be gradual this year and that market bulls should not expect a sharp increase in activity,” Matthew Sherwood, Sydney-based head of investment markets research at Perpetual Ltd., said in an e-mail. “The U.S. consumer has consolidated their recent increase in activity.”

The Asia-Pacific gauge traded at 12.7 times estimated earnings as of yesterday compared with 16.1 for the S&P 500 and 15.2 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

FTSE Outlook

FTSE 100 Prediction
FTSE 100 Prediction

Only one of the trades took yesterday, being the short from 6875. It didn’t quite dip as low as the long order at 6840 which was a little bit of a shame, but the short around the 6905 area is still valid for today. Interestingly the Bianca 10 day channel has tightened up a bit and the top is now only 6892. I think I will split my shorts and go off both those levels – 6892 and 6905 and see what happens. I think the market is still heading a little bit higher though but shorting at resistance levels make sense just in case it decides to start declining earlier. The 20 day channel top is at 6949 and I do have a longer term resistance level also at 6937 – so there are some key levels to watch over the rest of this week.

Support wise today I am looking at the daily pivot area at 6865 and below that 6838. If those break then 6811 and 6765 are the lower supports.

So, those are the main levels to watch but it actually gets a little tricky to call when its like this (not that its ever that easy of course!) as we have a decent 30 min channel with resistance at 6873ish, and support at 6855, so taking the bigger picture levels out I’d favour a dip down from this 6870 area (which is possible as the rise off the supports was pretty slow yesterday and buying interest at all time highs is going to start to wane).

73 Comments

  4. Im in a short at the moment not sure how the BoE governors speech will affect things though. Due to speak at 10.30

  7. Curiosity, looking just now to IG analysis and they look very bearish in all indices.
    Looking for a drop to 6300, 1815 and 16040 – FTSE, SPX and DOW

  9. Stupidly I jumped on the band wagon this morning at 67 so im actually in loss right now. As soon as it hits any profit again im most likely going to close. However looking at what PMS just said I may just hold it there and not trade for a few days to see what happens

    1. These news are just hinting about new highs. with that view I am planning to buy any dips. Just my view.

  10. Morning just got out of meeting not in anything just reviewing market to see how to play it today

  16. If this does drop off after lunch I suspect a bounce off 1890, 6840, 16630 levels to go long looking for the top of 6905 before the reversal takes step.

  18. IG’s Chris Beauchamp g+, London
    Wednesday 14 May 2014 10:19
    “In mid-morning trading the FTSE 100 is marginally in the red, but remains close to yesterday’s 14-year high, as momentum to break out of its recent trading range continues to build.”

    A bit behind the curve as usual, but not bearish! 🙂

  19. Thanks Jim was wondering where the Looking for a drop to 6300, 1815 and 16040 – FTSE, SPX and DOW came from?

    1. Not aware that IG issues forecasts – they would probably be accused of trying to mislead their customers . . . . .

  20. Lol, it’s there analisys…sometimes, they change very quick from one day to another and also sometimes they not make any sense IMHO.

  21. But I think is not directly from IG, but an independent entity in the IG plataform

    2. Ah-ha! You’re talking about ‘Trading Central’ I think. Yes, they were wildly bullish not so long ago if I remember – they seem to frequently wipe the slate clean. 🙂

  23. SPX at 1888-1890, I think this afternoon. The inability to close above 1899, made me think that we should see another drop, not so sharp.

    1. Been holding a long @65 for a while now was just glad to get out not feeling it but could be very wrong

  26. FTSE/4 hrs — “Fast” growth indicator still a whisker above zero — flat trend and little action. I’m not ruling out another modest upswing, but that still has to start showing some development. (Now out of the market.)

      1. No. Just making a statement. Should I wake up earlier to catch the train earlier ?

  31. Well, well, FTSE leading the charge, 4 hrs just ticked up (off zero), so if this develops a little, 6900 looks very doable.

  33. Still holding Dow short deliberating whether to see if it goes through 16638 and onto 16566

  35. IMO biggest deterrent for shorting is that too many people are shorting, this week over 80% on each indice. Unless the big boys sell off I think we will see record highs before the drop.

    1. spot on mate,i think we will see the record tomorrw or thursday n start declining from friday

      1. tomorrow is thursday =). Some big numbers coming out, the market will actually MOVE this week.

  36. Hmm,

    Are we at good news is good news?
    My sentiment is slightly Bearish.

    A while ago everyone said 6900 is not possible, but yet we find ourselves almost there?

    I think Friday will be a Black Friday, so am short 🙂
    Looking for 6550 on the next swing.

    Gl all

    1. its caution my friend, though I do have a 100pp on the S&P 1900 =). Poised with my shorts though. Got burnt already shorting the DAX after last week`s bear trap, was up +70 pips DAX recovered 160, hit stop for a loss of -40points.

  37. Agree, hence cautiously bear.
    I am normally full on Bear or Bull, this time around there is great uncertainty.

    My theory for this year means that higher highs and lower lows make for difficult trading 🙂

    Am still of mind that FTSE will outperform the US and things seems that way ATM. FTSE seems very strong, but worth a shot 🙂
    Gl mate

  45. Marco I think your being too hasty…especially before tomorrow’s results, IMO will push the market up, whether it will go down afterwards or stay strong is something we will have to see…

  48. It does look like the 1888 is holding for the moment so this could be the pull back for one last push up. I am still expecting that 200 ma to be hit on the 1 hour might pop up tomorrow morning and fall once Dow opens.

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