Asia retreats, 6130 for support, can it ever break 6200?

Support 6143 6138 6128 6067 6045
Resistance 6170 6177 6200 6209 6242

Good morning.
Market Summary for Monday 14th March 2015
A largely non eventful day on the markets apart from Brent crude dropping nearly 3 percent after Iran dashed hopes of a coordinated production freeze.
The FT100 oscillated in a small range between 6160 and 6180 as traders took to the sidelines after last week’s move up and the FED this week.
So stalemate for most traders.
On the upside were some commodity shares and housebuilders and to the downside oils, insurance and gold. The gold short worked well yesterday, as did the S&P long. FTSE and Dax orders weren’t triggered.

US & Asia Overnight from Bloomberg

  • Yuan weakens as PBOC cuts fixing by most in two months
  • Aussie, ringgit decline as commodities prices retreat

Asian stocks retreated from a 10-week high and the yen strengthened the most in a week as the Bank of Japan held off from adding to record monetary stimulus at a review on Tuesday.

The MSCI Asia Pacific Index declined for the first time in four days as all 10 industry groups lost ground. The yen strengthened against all 31 major peers as the BOJ maintained a negative policy rate and kept asset-purchase plans unchanged. The yuan depreciated as China’s central bank cut its daily fixing by the most in two months. Malaysia’s ringgit and Australia’s dollar led losses among the currencies of resource-exporting nations as oil dropped below $37 a barrel. Gold fell to its lowest level in almost two weeks.

While world equities have staged a comeback since reaching a 2 1/2-year low in mid-February, so far there are few signs that monetary easing in China, Europe and Japan is pulling the global economy out of a slump. The Bank of Japan’s decision to maintain policy was forecast by most economists and the authority said it’s prepared to ease further if needed to revive inflation expectations.

“As a whole, this is not a negative and not something that will derail the market’s recent trend in the risk-on direction,” said Yusuke Kuwayama, a portfolio manager at Tokio Marine & Nichido Fire Insurance Co. in Tokyo. “The focus now is on tomorrow’s FOMC.”

The European Central Bank announced unprecedented stimulus last week, while the Federal Reserve will conclude a review on Wednesday and the Bank of England a day later. Investors will be seeking guidance from the Fed on the trajectory of U.S. interest rates as expectations build for policy makers to add to December’s increase.

Stocks
The MSCI Asia-Pacific gauge fell 0.8 percent as of 2:52 p.m. Tokyo time, led by declines in raw-materials producers. Benchmarks declined across the region with Japan’s Topix index losing 0.5 percent and Australia’s S&P/ASX 200 Index sliding 1.4 percent. The Shanghai Composite Index declined 1.2 percent.

Standard & Poor’s 500 Index futures retreated 0.2 percent, while contracts on the U.K.’s FTSE 100 Index dropped 0.4 percent.

Currencies
The yen strengthened 0.3 percent to 113.47 versus the dollar. While only five of 40 economists surveyed expect further easing at Tuesday’s BOJ meeting, 88 percent forecast more stimulus by the end of July.

“The BOJ conceded that inflation expectations have weakened, pointing to a high near-term risk of more policy easing,” said Joseph Capurso, a currency strategist at Commonwealth Bank of Australia in Sydney. “The yen will test 110 per dollar before the middle of the year.”

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, was little changed Tuesday after rising 0.4 percent last session. While traders are pricing in little chance of a Fed rate increase on Wednesday, they have boosted bets on a move happening later in the year. Fed funds futures show the probability of a June increase is now about 50 percent, having risen from less than 10 percent a month ago as U.S. economic data improved and equities rebounded.

The ringgit declined 0.3 percent versus the dollar as the dip in oil prices dimmed prospects for Malaysia, Asia’s only major net exporter of crude. The currencies of Australia, Canada and South Africa all lost 0.3 percent or more as the Bloomberg Commodity Index fell for a second day.

The yuan fell 0.12 percent after the People’s Bank of China lowered its reference rate for the currency by 0.26 percent. That’s the biggest cut since the first week of January, when a series of weaker fixings heightened concern about the state of China’s economy and spurred a global stocks rout. China’s central bank has drafted rules for a so-called Tobin tax on foreign-exchange transactions that would help curb exchange-rate speculation, people with knowledge of the matter said Tuesday.

Commodities
The Bloomberg Commodity Index was headed for its lowest close in a week. West Texas Intermediate crude fell 0.7 percent to $36.91 a barrel, extending Monday’s 3.4 percent slide. U.S. stockpiles probably expanded last week, keeping supplies at the most since 1930, analysts predicted ahead of data due on Wednesday.

Gold for immediate delivery dropped 0.5 percent to $1,229.43 an ounce, after sliding more than 1 percent on each of the last two trading days. The precious metal, regarded as a hedge against inflation and a haven asset, is still up 16 percent this year. Copper declined 0.4 percent in London, falling for a second day.

Bonds
U.S. Treasuries due in a decade were little changed, yielding 1.96 percent. Pacific Investment Management Co. predicts the rate will climb as high as 2.5 percent this year as inflation accelerates and the Fed raises interest rates.

“We see one to two rate hikes this year for the Fed, whereas the market is only expecting only one,” Mark Kiesel, one of the three managers of Pimco’s $87.8 billion Total Return Fund, wrote in an e-mail. “If rates were to head towards 2.5 percent, we would be looking to add at that level.” [Bloomberg]

FTSE 100 Outlook and Prediction

FTSE 100 Prediction
FTSE 100 Prediction

Looks like another sideways day at the moment though the decline in gold from 1260 yesterday could help push the FTSE higher today. We are still in the 6100/6200 range for the moment and with the Fed later this week again we might continue this sideways chop for a bit longer. Interestingly my 2 hour chart has decent support at the 6130 area for a push higher, whilst the 30min chart has resistance at 6158 and 6177 to start with. The 200ema on the 30min has held as support initially at the 6140 area. There are a lot of support and resistance levels all clustered quite close together which isn’t ideal. I have put the plan B pink arrow on todays chart which I don’t do too often. Basically if we do hit resistance at 6177 and then drop off, the bears will either continue that drop on a break of 6160 or it will bounce there for a run at 6200 again. Hard to say at the moment so be prepared for both eventualities. Generally, with the 2 hour chart being bullish and support at 6130 I am favouring a bit of a rise today, however, the failure to really break 6200 yet still keeps the bears at the table. Also worth trying shorts at those 30min resistance levels but keep the stops tight. Stay nimble really and I still have my wild though for a rise to 6350 after that Thursday action last week!

75 Comments

    1. Tomorrow mate. As far as affecting the FTSE, minimal would be my guess, possibly spun as bullish with “austerity” continuing.

      1. woops watching Bloomberg half sleepy is not a good thing, thanks tmfp.
        Also, if it was today Nick probably would have mentioned it, going to sit in the corner for a bit now…

        1. If he announces big (white elephant?) capital projects like rail and road schemes, could be bullish for construction sector.

          1. Shows why we should remain in the EU. British economics to a degree have relatively little influence on the FTSE. Budget and FOMC meeting announcement tomorrow and the only thing any reasonable investor really gives a hoot about is the event in the US. The economic headwinds in Asia, US and the EU have far greater impact.

            The sovereignty argument is fallacious.

  2. All looking much weaker today, maybe a small down day most investor waiting for tomorrow fed meeting.

  3. Morning.
    Still BTD, (great vid yesterday Si 🙂 ) although a long at 20 earlier was counter intuitive but productive.
    It really looks vulnerable to another test/break of 6100 this week for me. Whether before or after the Fed is another question.
    With the actual mechanical effect of ECB measures still to fully kick in, maybe a long DAX/short FTSE arb would be an idea.
    Bought a bit of VIX as a bear option.

    1. Not really an arb. More a play on the Dax using the FTSE as insurance to negate most of the underlying beta.

  5. Morning All, We now have 30-45 range, came out -6 for my first trade this morning on DAX 🙁
    Looking to short FTSE around 55 for now and a small long at 30 maybe
    GL all.

  6. JPM just malipulating the markets been going on for years but even better when you have cheap central bank money to fund it.

  7. Morning all….well City really excelled today…..according to them the high on Ftse was 19842.9…..and low of 6119.3 …..and the percentage change said ……wait for it……..INFINITY…..Sometimes I just have to laugh…they also gave the high on the Dax as 50687.4. Low 9927.3 …. Not encouraging really.

  8. Yen slaughtering all currency pairs this morning, Yen is a safe haven and oil getting whopped.

  9. Morning all, plan for me is to run the small Dow short and FTSE short from last night. Dow target around 16700 and FTSE target around 6000. Stops at break even for the pair. Basically a 50/50 bet on which way it’ll break!
    Talking my own book for a moment, Oil looks a little sad! Good luck all.

  10. IG flagging up this 9900/9928 as pretty crucial support for the DAX, one to watch later if the DOW comes in below 17140. Still plenty of time for a shakeout before the Fed.
    Cleaning my bear goggles again…

        1. I know lol, I have only placed two trades today. Back to where I was this morning at 08:00 am 🙂
          Nearly 2hrs left for DOW to open so I will go do some real work and will back to short 50s or maybe 60s if I am lucky!

          1. Depending on what happens in the meantime, I’m thinking about going into the DOW opening short for some initial weakness, maybe to 17090 support, which would put pressure on our 6113 low.

  12. Lol, just having a micro dabble for £10 pp, didn’t move the cursor to enter the 5 pt stop and ended up long @ £105 pp.
    Currently + £210 b/e stop

    Took +4.5 🙂

          1. Hi Senu, how’s it goin? good to see you back on the board. Not seen you on here since Christmas ….best of luck with your trading in 2016 …..

      1. Yeah, a bit early to call as just pre DOW nerves but there’s downside potential this afternoon I think.

        1. Yes I think FTSE can head south to 6080 or maybe 6050 by this afternoon.
          We might get a bounce to 6155 area to short if we are lucky!

          3. That 9900’s a tough one to crack, tech support and big number. Still making lower highs though.

          4. IG Charts are all over the place at the moment as Nick mentioned earlier with support and resistance and I can’t seem to decide what to do next so I will just short the bounces and buy the dip for rest of this afternoon!
            With regards to DAX – I can see there is a big gap down south but maybe everyone is waiting for Fed until tomorrow.

    1. Could be.
      Chart targets to break or support at are 17140, 17097 and 16918 on the hourly according to IG’s Mahony.
      Neither DAX nor FTSE performance will be giving them much encouragement and if they open less than 100 down may try a rally and then run out of steam.
      That’s the plan for me anyway.

  14. Oil is recovering slowly now and if it’s going to hit 40 again than I am switching to long and will buy the f…… dips (Thanks Si for the video yesterday)

    2. Yeah, its pretty quiet alright. I think I’ve done just about everything you can at 35.5, longed, shorted, covered.
      Still fancy some proper weakness this pm though.

          5. I was just going to write trend is changing to bull but I guess I was wrong, nothing is going to change until tomorrow!!!

  18. Really frustrating day. Don’t know why I chose long direction today but I insisted and now 35 pounds short, don’t even know what it is in points, it’s been a random staking today. Had various longs, shorts but in the end decided that I will stick to long from 9945 started I don’t know maybe after 11.00 and only now I managed to close at 9938. Totally messed with with direction. It seemed that long was round the corner, all these falst spikes and rejections. Got tired in the end but came to a loss of 35 (had various wins and losses in the process). I even had a short just before I wrote 9937 but decided not to stick to it +2. Lost the direction for the moment and for today. Sad, won’t manage to recover today. Upset.

    1. It has been difficult today, Jack.

      I was down a bit earlier, and spent most of the afternoon picking up odd points so that I could end the day at break-even. I’m out now, but having turned over £199.45 today, I’m just 25p in profit!

      1. Frustrating day. And the price is still there, didn’t move. No, I like trend days as long as you are on the right trend of course 🙂
        I wish I chose a short day after 11 but I took that rise from 8.30 as a possible starte of the rise and was looking to pick up dips. Stakes gone up to £8 which is no good but I managed to cut it quickly on bounces and kept £3 with £1-2 ad upps.
        What do you mean by turning over? Did you have a loss of £199 and then recovered to 25p? Or you had stakes which in total worth £199?

  19. Doesn’t look to be much Mad about the upcoming close, still patiently waiting for sustained weakness, no longer holding breath.

    1. I am looking to short around 50 or a last minute bounce, don’t think we will have major weakness today even after close!

  20. well thats it boys and girls i am out for today the ftse is going to sleep and so am i:)

  24. As expected a wait and see day prior to the big event tomorrow – no not the UK Budget. The rate decision is a foregone conclusion of course. The market made sure of that by spitting out its dummy at the thought of 4 rate rises which the Fed had signalled in December. So the question is around whether the Fed will flag up 2 or 3 rate rises. I lean towards to the latter.

    Interesting that oil fell by 3% for the second day in a row and the market moves sideways or moderately up. De-coupled only when the market wants to. Either way something will give tomorrow which will probably continue for remainder of March.

    Some interesting comments from Russ Koesterich, BlackRock’s global chief investment strategist……

    The equity rebound of the past month is a classic “relief rally,” where investors are relieved conditions are not as bad as they previously feared. This one has been partly predicated on hopes that China is stabilizing, which helps explain the sharp rise in commodity prices given that China is the biggest commodities consumer.

    Unfortunately, signs of real improvement in China are scant. While the U.S. appears to be stabilizing, the Chinese economy remains challenged. The latest evidence came in the form of a 25% plunge in Chinese exports. This was the largest single-month drop since 2009. The government is likely to try to stem the decline with some palliative measures, but a large stimulus package remains unlikely. Furthermore, the drop in Chinese exports calls into question not just the state of the Chinese economy, but the global trade picture as well.

    Against this backdrop of continued uncertainty in the global economy, the recent rally is beginning to look a bit excessive. This is particularly evident in the sharp drop in volatility. The VIX Index, a key measure of equity market volatility, has fallen to about half of its February peak. Meanwhile, the VVIX, which measures the volatility of volatility (or, more precisely, how frequently volatility spikes occur), is back to its lowest level since last August.

    Given the still uneven pace of global growth and tighter financial market conditions, this may too be low. This, in turn, suggests the potential for a rise in volatility — which would imply another bout of stocks selling off. March may have come in like a lamb, but the lion may be lurking.

  26. Evening anyone who has bothered to stay awake!!just been stopped out of Dow short at break even. Limit sell at 250 now.

    1. Evening chippy……it’s been a bit of a slow day tday. Maybe tomorrow will be more lively with the U.S. data good luck mate.

      1. Hi anstel, just back from a march with the dog and see that my stop probably equals the top! Hey ho as they say, always another. FTSE short still running and like you say, let’s hope for a bit of action tomorrow. Good luck fella!

  27. City’s platform is playing up again…..The FTSE has just jumped to 19811.4 and the Dax has had a modest gain and is now showing 50468.9….. It’s showing overbought so I don’t think I will go long at that price!!!! Come on City upgrade from that 486 for gods sake.

  28. same here some weird stuff going on my platform as well FTSE dropped 80 in one second…strange.
    486 i thought they were running sinclairs:)

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