Bear run continues, Asia down, Japan bear market and weak FTSE

Good morning. The main features of yesterdays trading were the GDP figure from China which was broadly inline with expectations and the signal that the BOE would not be raising interest rates soon. Both conspired to push the FT100 higher in morning pulling in some buyers and breaking the 5900 level. Our short at 5888 kicked in and narrowly avoided being stopped out which was lucky and then benefitted from the 50 point fall. As has been seen a few times now the Wall Street open was more negative than expected and so the FT100 fell in the afternoon to see the 5805 level mentioned in the email. This was caused by a fall in crude prices which fell below the $30 level again. We got the bounce here at 5800 to 5850 but it has now fallen away again overnight, with Japan officially entering a bear market as well, and we are at 5750 to start off today. Interesting times!

US & Asia Overnight from Bloomberg
Asian stocks resumed declines as Japanese equities retreated and a gauge of energy shares traded near its lowest since 2008.

The MSCI Asia Pacific Index slid 0.2 percent to 119.61 as of 9:02 a.m. in Tokyo, after climbing 0.8 percent on Tuesday to pare the measure’s 2016 slump to 9.2 percent. While Brent crude rebounded, U.S. oil capped a 3.3 percent decline from Friday’s close, hovering just above $28 a barrel as the International Energy Agency fueled concern over the global glut. The 14-day relative strength index for the regional stock gauge, a measure of momentum, traded below the 30 level some traders take as indicating shares will rise.

“We’ll continue to see a tug of war between nervous sentiment and technical indicators showing that falls have gone too far,” said Chihiro Ohta, general manager of investment information at SMBC Nikko Securities Inc. in Tokyo. “At the root of the selling we’ve seen this year has been the imbalance of oil supply and demand, so until the oil price moves calm down, the stock market will struggle.”

Japan’s Topix index lost 0.7 percent, led by energy explorers and oil and coal producers. Bank of Japan officials are increasingly expressing disappointment at subdued annual wage talks, said people familiar with the discussions, making next week’s monetary-policy decision a closer call.

Australia’s S&P/ASX 200 Index lost 0.1 percent, with BHP Billiton Ltd. falling 1.5 percent after trimming its full-year iron ore forecast. New Zealand’s benchmark gauge added 0.2 percent, while the Kospi index slipped 0.5 percent in Seoul.

Consumer discretionary, material and energy shares led losses on the regional benchmark gauge on Wednesday. The MSCI Asia Pacific Energy Index dropped 0.4 percent after a 1.7 percent rebound on Tuesday from the lowest close since 2008.

U.S. Shares
E-mini futures on the Standard & Poor’s 500 Index dropped less than 0.1 percent. The U.S. gauge closed a volatile session little changed, near the lowest level since August, as gains in consumer shares offset declines in commodity companies.

With markets in Hong Kong and China yet to open, futures signaled declines in most recent trading. The Shanghai Composite Index jumped 3.2 percent on Tuesday, the most since November, with Reorient Financial Markets Ltd. saying government-led funds may have entered to bolster the market.

Data on Tuesday showed China’s economic growth missed analysts’ estimates last quarter, while industrial production, retail sales and fixed-asset investment all slowed at the end of the year. The government may further ease monetary policy, such as by cutting interest rates or lenders’ reserve-requirement ratios, according to Northeast Securities Co. and Central China Securities Co.

After the close, China’s securities regulator said it allowed seven companies to move forward with initial public offerings, the first time since a new system for IPOs started at the beginning of the year. [Bloomberg]

FTSE Outlook and Prediction

FTSE 100 Prediction
FTSE 100 Prediction

It’s not a good sign for the bulls in the short term that they were not able to hold onto the bounce from 5800 last night. It managed to get as high as 5860 before the bears took over and the weak Asian session dragged it down. We have the 5740 recent low in the cross hairs again now, but with a fib pivot support at 5733 might see a bit of a bounce here. The bulls really need something like oil to bottom out to stop the rout though there doesn’t appear to be much sign of that at the moment. However, we have Draghi speaking tomorrow which may well be a stimulus to prop up the markets/stop the falls so bear that in mind and we may see a bit of stabilisation this afternoon. Could do with another “we will do whatever it takes” speech. I have sort of plotted that with the arrows – a rise from the bottom of this 30min channel at the 5750 level to test the 5800 (yesterdays lower support, and now resistance on the 2 hour chart) before further downside this afternoon. One of the reasons I am expecting the sell off to reverse is that gold has stayed below the 1100 level – as its typically a safe haven (though admittedly less correlated recently) I would have expected that to climb a bit higher during last night Asian decline. So for today, looking at it remaining weak, with eyes on 5733 to see what it does there.

151 Comments

  1. Heavily short from the get go today, if it’s a bear trap my head’s going to be on a log cabin wall tonight. 🙂
    Watch the DAX 9300, if that breaks there’s a lot of fresh air, same with DOW 15500.
    Not getting completely carried away, covered a bit on second visit to 15 but probably give it back at 10.
    Be careful out there folks…

  2. Your head wont be on that wall but if there wasn’t another side there wouldn’t be a market! First purchase at 5720. Limit at 5650 and so on…..!

  4. Unfair, totally unfair. Who allowed markets to go short overnight? Why don’t they sleep? Now Dax started moving overnight as well instead of opening with a gap (it’s all the same). Also on my ticket new option appeared: Force open. What that could be?

    1. Hi Jack, on IG ‘force open’ means the trade isn’t automatically allocated against an open position, so you can do that ‘hedging’ thing.
      What do your charts say this morning mate?

  7. Morning’s short term downtrends on FTSE and DAX now broken, could be in for a bit of consolidation/dead cat.

        1. I’m all for shorting as you may have gathered Jack, all I’d say about 9400 is it’s only just above three goes at breaking 85/90 so might run on a little more.

          3. Didn’t much like it second time either, third try coming up, if it doesn’t clear 400 this time, then will probably have another look at 360 support.

      1. EU data out tomorrow I’m wondering if it will consolidate and go up,especially the Dax.any thoughts anyone?

        1. I’m not going to rant on, but this is looking over the abyss today, data will be interpreted to suit.

  10. I can see in my mind’s eye some red braces geezers working out a big stop hunting short at some point today.
    Somebody give me a hedge fund and I’d have it in the 5500’s in half an hour lol.

    1. at 355 area? Bit middle of nowhere for me Jack. I’d trade it 320/400 for the time being myself. 360 is 50% of 320/400, about all it’s got going for it really.

    2. Wow, intuition is a useful thing. But generally it worked out as I thought, 61.8% retrace so it bounced up.

    1. Hi WSF, yeah much wailing and gnashing of teeth in Bitcoinland.
      Depending on what side of the block size debate you’re on, Hearn is either a guru or a CIA stooge.
      I’m long average 278, looking for 10,000, already opened wallets wallets for the grandkids. They think I’m mad anyway, so won’t hurt.

      1. Listened to an interview with a Bitcoin trader last week,it was pretty interesting,chat with Traders ep 53,if you have a spare hr sometime, BTCVIX on Twitter,think he called it the Wild West with similar opportunities or something.
        Re CIA stooge,they say that about Icke,that his Lizard stuff is designed to discredit other stuff he repeats from other people 🙂

        1. I’m on Bitcointalk most days, tis indeed the Wild West, more accurately the Wild East given the dominance of China in mining.

          I reckon Icke’s a lizard myself.

  14. Morning All,
    Bit late again ….have I missed anything ..LoL.
    Another drop just past 5696/98 – retrace & now resistance …:-0
    Keep rackin’ my thoughts as to what might provide some support of this but keep coming up empty…
    Read a few of the results from US last night – IBM bit gloomy from what I read – only compounds all the other stuff going on.

    1. The only thing that’s underpinning a potentially much bigger sell off is the fear of direct buying intervention by Plunge Protection Squads in the US, EU and China.
      That rise in interest rates will come back to haunt Yellen, for whatever reason Carney managed to resist the temptation.
      If Draghi thinks he can talk his way out of this, he’s deluded. Look at the state of Italy, Spain and Portugal. Zombie economies.

          4. I’m trading the Moulinex System today, put longs in the top, blend for a session and then eat warm on toast.

    1. It’s more likely to be a break imho so I won’ attempt short at the moment. But it’s more like a major guess.

  16. Noon coming up, has been the time of sharp rallies occasionally recently.
    If we dip to near the lows before then I’ll take out that over enthusiastic 96 short for a better entry.

          2. Lol, “squawk” and Brazil…. did you know they’re the cheapest chicken producers in the world? About 1p a kilo apparently.

    1. The cash bull run from march 2009 to april 2015 was 3460-7122 ie 3662 pts.
      7122-5692 is 1430 pts.
      So 1430 is 39% retracement of the whole bull run.
      Fibonacci levels are 38.2% then 50% (although there’s some argument over that, some say 61.8 is next in the sequence).
      So you could say that if these are the lows, then it was a 38.2% retrace that overshot slightly. If they’re not the lows then 50% is next, or 1831 pts ie 5291 or for the purists 61.8% which is a target of 4859….

      Got to go, these bast*ards are trying to stop me out 🙂

  19. If the DAX can finally break 9400 we could have a little pre DOW rally, 15 would be my first FTSE target, so stopping that last short at equivalent 415.
    Main short 30% stop at 20 and 34, balance at 42, target 6355.

        1. Bit busy atm custard the bulltards are forcing me to take profits, just wondering when best to resell.
          Are you taking +30 or going for more?

          3. lol, don’t do that, I was just protecting my profits, still very bearish.
            I thought 20 was a bit tight but it’s good money in the bank and still got 70% left for a nice DOW crash 🙂

  20. Oops, just noticed Nick’s arrows. It looks like this big bounce has already begun. No more shorts today? I came out of my shorts but wanted to go in later, but now it seems unlikely (plus Nick’s arrows…)

  22. Had a cheeky little long on the dow earlier at 15710 to add to my FTSE collection. I’ve now completely bottled it and sold dow for +20 odd points and FTSE for +10. Sit on my hands again.

    1. Large retail long positions aren’t a bad sign for bears, just more fuel for the fire when they get stopped out.

  28. MHH coming up already, don’t think we need to worry too much about divi hunters today, looking for choppiness with short covering and long liquidation mixed, still waiting for my 55 target and expect the DOW to go lower later, had 15535 in mind all day.

        1. Nice one tmfp, looks like you’ve had a good day. Added at 5650, someone has to mop up your stock!

          1. Been a blinder thanks chippy, best this year (and most of last), good luck with the long, there’s a bounce in it soon, just hope there’s not another day or two like this before it.

          3. out for 5 DOW looks like it wants to have a go at 650 again and I’m knackered Best part of the day, counting the money lol

          4. I intraday trade the ftse, gold trader, one minute 5633 will be a long for me, the next minute a short.
            I have no desire to play the long game, nor the temperament or pockets. And I think Warren Buffet’s a bit of a twat on the quiet.
            🙂

            And by the way, the low of 2012 was 5229, easy mistake to make. What’s 404 points anyway?

  29. When it drops like this, how do we work out lower levels to trade off. Is it that we just look further back in history or would those levels be void after so many months?

    1. All data is time proof really Coombsy, despite the fact that the constituents of the indices change regularly.

  30. I wonder if we will find a bottom! It’s a stealth crash really isn’t it,slowly killing the value of the indices .

    1. If you get up a weekly ftse chart anstel, you can draw a lovely downtrend line from late April which currently stands at around 6200. Until that breaks we will continue to go down, probably in steps, the size of which you can try and measure with reversion to mean indicators like Bollinger or rsi (monthly rarely breaks 30 for very long).
      It’s a bit academic really to intraday trading though, a bit of a distraction, just play each day as it comes.

      1. I have just spotted your post tmfp ok Im having a look now at Ftse weekly chart.bloody hell yes I see what you mean.thanks again for all the info you give us all on here.

    2. 300 point stop loss for just shy of 400 gain. Risk reward not great. You have got deep pockets thou.

  32. And here we go again, 15535 (and maybe lower) beckons…..
    But not to me, enough is enough, catch you tmrw.
    🙂

      1. Just getting all nostalgic,remember when Ftse was 6300 at Christmas and the Dow over 17000 and the Dax over 10000 I wonder if 5300 Ftse and 15000 Dow are the new norm or whether it will climb back up!crazy times!

    2. Is that you doing your Buffet impression again anstel?
      “reasonable value”? LOL
      You’re not an investor or economist, you’re a grubby little gambler like me 🙂

  35. I’m just hanging about, shorted at 33 like goldtrader said ;), looking to fulfill my last prediction of the day and see 5500’s before the end of it.

          1. Bloody hell they will be giving it away soon. Doesn’t seem to have dropped that much at the pumps though!

    1. Right, that’s all my boxes ticked, just trying to think of excuses not to put a deposit on this bloody house in Gozo….unfortunately, she’s seen today’s windfall 🙁
      I shall leave you in peace till the morning.

      Just one story for custard from the Good Old Days…
      As ring traders we never dealt directly with individual clients but through account execs at places like Bache and Merrill Lynch. One day an a/e asked me to talk directly to a VIP client who had a lot of money with them.
      Copper was on a bull run, so I bought him a couple of three month warrants (50 tonnes) and it duly went up, so I phoned him, introduced myself and told him the good news, that he was long of 50 tonnes of wirebars and showing £2k profit.
      The phone went quiet, then he said “But, but…..where am I going to put them?”

      1. 🙂 He must have worked really hard for his capital to be so clued up on how it’s invested.
        FWIW the Ferry used to be an argument against Gozo,but I guess it’s better now.I’m going to give my day to Barclaycard,it’s what Mr Bridger would want,”On days like these” and all that 🙂

    2. welcome…
      here is PLAN B
      will be shortng at 5767 – 5775 targettiing 5580 – 5540
      Long at 5540 if it goes against me add more long 5500 Close at 5765 (1 August 2015 Low)
      Stop at 5300

      Happy trading…..

  37. hi all
    can anyone let me know if there is a way of following the comments without having to refresh my browser every couple of minutes to see if there are any new postings. any help much appreciated..

  39. I am not trading Dow Jones but according to indicator long aty 15800 target 15990 & 16190
    trade at your own risk

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