Support 5928 5903 5871 5823 5818 Resistance 5946 5963 5976 6197

Good morning. The FT100 has now fallen for 8 days in a row so one would expect that there are fewer and fewer sellers remaining! At some point there will be a sharp rebound and perhaps Tuesday will be that day especially with out of hours FT100 moving to the upside. The FED could prove the turning point this week so the shorters could start to take profits this week before any announcements which could be the catalyst for a move higher. As oil and commodity prices continuing to fall the oil heavy FT100 is at 10-week lows. The FTSE 100 index was down 1.35% at 5874 at the close.

US & Asia Overnight from Bloomberg
Asian stocks fell amid concern over turbulence in the credit markets as the Federal Reserve prepares to raise U.S. interest rates. Energy shares rose for the first time in 10 days after crude oil rebounded.

The MSCI Asia Pacific Index fell 0.2 percent to 127.85 as of 9:11 a.m. in Tokyo, extending declines for a sixth day. Energy companies increased 0.1 percent after oil futures rallied 1.9 percent on Monday. The group had plunged 8.4 percent since Dec. 1 as crude reached the lowest levels since 2009.

A sense of unease prevails in global financial markets as the Fed starts its two-day policy meeting on Tuesday, with traders pricing in 76 percent odds that rates will be raised for the first time since 2006, ending the era of near-zero borrowing costs. Tightening policy would solidify the Fed’s divergence from other major central banks, with policy makers in Europe and Japan still emphasizing measures to support growth.

The prospect of more expensive cash in the U.S. and a deepening rout on commodities markets have helped erase $2.5 trillion from the value of global equities since Dec. 1. Bond market anxiety also has caught the notice of equity investors after Third Avenue Management froze redemptions at a high-yield mutual fund last week. Prices on U.S. high-yield bonds kept sinking Monday as London-based Lucidus Capital Partners became the latest fund to liquidate holdings as investors demanded their money back.

Regional Gauges
“There’s no chance in the world the Fed will hold off raising rates because of this credit-market turbulence,” Michael McCarthy, chief markets strategist in Sydney at CMC Markets, said by phone. “The collapse of junk-bond funds is not a sign that credit markets are about to freeze. It could lead up to a series of events, but in itself this is not a sign of systemic stress in credit markets.”

Japan’s Topix index dropped 0.1 percent. South Korea’s Kospi index increased 0.4 percent. Australia’s S&P/ASX 200 Index increased 0.2 percent, while New Zealand’s S&P/NZX 50 Index was little changed. Markets in China and Hong Kong have yet to start trading.

China’s stocks climbed the most in five weeks on Monday as miners rallied on the prospect of production cuts to bolster prices and data showed the world’s second-biggest economy is stabilizing. The Shanghai Composite Index advanced 2.5 percent.

E-mini futures on the Standard & Poor’s 500 Index climbed 0.3 percent after the underlying measure rose 0.5 percent on Monday, surging in the final minutes of trading as a rebound in U.S. crude oil to back above $36 a barrel overshadowed credit-market turbulence and weakness in commodity shares before the Fed meeting. [Bloomberg]

FTSE Outlook and Prediction

FTSE 100 Prediction
FTSE 100 Prediction

5928 is looking like a fairly key area to start this morning off and a break below this will likely lead to S1 at 5881 and possibly the bottom of that 10min channel at 5860. To start with we have pretty decent 10 minute channel in play with resistance around the daily pivot area at 5950 and this looks like it is worth a short. The bottom of that channel is at 5860 and I am not sure it will get that low, having rebounded strongly overnight from this level already. However, if it does then a double bottom bounce could well be worth a go. It will also be worth trading breakouts of these levels today as its been pretty volatile recently, and a move above 5950 is likely going to try for the top of the 30min channel at 5980. Above this then 6000+ looks likely. My 2 hour chart is showing some bullishness but the bulls really need to start showing some strength to reverse these days of declines as every rise has been rebuffed. They are mostly waiting for the Fed tomorrow of course and a favourable outcome of that for the markets will then likely see 8 days of gains, reversing all this bearishness. We shall see! So in summary weak bull at 5930, better bull at 5870, bearish at 5950 and 5980.