Bit more downside – 6400?

Good morning. Well yesterday was a bit of a dull one after all that wasn’t it! We got the initial move with the rise to the 6466 line, then spent the rest of the day flat lining while waiting to see what happened in the US. Well they are now going to have the first government shut down for 17 years today as no agreement was reached. Doesn’t bode well for4 the debt ceiling talks on the 17th mind! Apart from that, it was all fairly quiet in the end, UK house prices are expected to rise 25% by 2018 according to news yesterday (but its not a housing bubble they say!).  George Osborne pledged yesterday to freeze fuel duty till 2015, and also talked about his plan to squeeze public spending still, and then plan to have a budget surplus.  Overnight we have had a little bounce to 6480 but since fallen back to yesterdays close level. I think a one day shut down will be shaken off by the markets quite easily, however, if negotiations drag on then it could get more serious and worries will start about the debt ceiling and a possible loggerhead situation with that as well, which will definitely drop the market down to that 6200 area I mentioned, probably in November. I am still optimistic of a decent finish to the year though, maybe around 6800?

Asia Overnight from Bloomberg

Asian stocks rose, led by Japanese shares, after Prime Minister Shinzo Abe said the nation will increase its sales tax as planned. Gains were limited by the first partial U.S. government shutdown in 17 years. The MSCI Asia Pacific Index rose 0.4 percent to 139.05 as of 1:48 p.m. in Tokyo. Japan will raise its sales tax in April to 8 percent from 5 percent, Abe said today in Tokyo. Lawmakers in Washington passed a midnight deadline without reaching a compromise to continue funding the government. Both sides of U.S. politics also are still in dispute over raising the nation’s $16.7 trillion debt ceiling.

“Shares are rising after Abe showed his leadership with the sales-tax decision, removing one uncertain factor,” said Ayako Sera, Tokyo-based market strategist at Sumitomo Mitsui Trust Bank Ltd. “But I don’t think the reaction will last long, as the tax increase was expected. A bigger issue is the U.S. Congress. The government has started a shutdown, making it hard for investors to make a move.”

The U.S. congressional standoff that shut down the government for the first time in 17 years is a buying opportunity for stock investors, if history is any guide.

The Standard & Poor’s 500 Index (SPX) has risen 11 percent on average in the 12 months following a government shutdown, according to data compiled by Bloomberg on the 12 instances since 1976. That compares with an average return of 9 percent over 12 months. In all the cases, the U.S. equity benchmark was higher by the end of the next two years.

While the S&P 500 has fallen seven of the past eight days on concern the political deadlock over the U.S. budget and debt limit will hurt the economy, investors at Raymond James & Associates and PNC Wealth Management say equities will recover as profits rise. Analysts’ forecasts show earnings will increase at the fastest pace in two years during the fourth quarter. More than 300 companies in the S&P 500 are scheduled to report results this month, according to data compiled by Bloomberg.

FTSE Outlook

ftse 100 prediction
ftse 100 prediction

Today’s pivot is 6471 and I expect that we will get some resistance there, like the Dax I expect an initial bounce to there and then the bears to have another go. I still have a possible 6400 are attest,  but it depends if yesterday’s low is broken, and with fib support at 6431 and 6416 it might not be a straight drop to that level. As mentioned above I am still feeling bearish now for a drop over the next couple of months (maybe a low in mid/end November) but equally am quite positive for the year end. As an aside I am still targeting a buy on Barclays at 217p and 250p so using that as a benchmark for the FTSE means we might still dip lower.

85 Comments

      1. Got 10 points back just now…
        Well, he he, sometimes he is also wrong. At least I don’t have to blame anyone. He he. It was my wrong decision after all.
        Plus my time commitment is limited and I don’t want texts on the mobile cos I am keeping it a secret.

    1. I wan to understand Ft as well? why Ft drop as US and DAX up.
      Why???
      Ft will drop to 6400by end of today ???

  4. 6800 by year end would be nice! As I said I’m now long for the final quarter. Expecting there to be plenty of bumps along the way – at least down to 6338 but as long as we finish the year at least 1% higher at around 6500 I am happy!

    1. Why you are long is you still think it will drop to 6338? Why cannot you wait for it before going long?

      1. Simple, he`s not a day trader, Anyways when it hits 6338 theres nothing stopping him from adding more pips to his running trade…

          1. Sorry guys been away from my desk.
            Yes that is correct Ahwab. Jack – as per my p&l analysis which I posted yesterday I put £600 per contract…..so effectively my stop loss is 600 points. Of course I hope we don’t fall that far!

            In terms of why I don’t wait the reason is phsycological. I could wait and wait for the level to be hit and it may never happen. On the other hand I know the last quarter has been up 76% of the times in the previous 30 years. That’s good enough for me. Make at least 1% – ie FTSE hits 6500 and I am more than happy with the year. Of course 6800 would be very nice.

  7. What a shame, waited from 6460 or something but it started cunningly crawling down. Hate this type of trades.

    1. same here. I’d be in profit now for the year but closed short £20/point @ 6441. no reason other than over-trading.

    1. thanks Nick. I don’t get informed via my platform so I rely on reuters website for div adjustment but can’t find todays. I think i remember last week they were slow to publish.
      Anyone know a more reliable source?

        1. Crap day, opened the short from 30 and didn’t manage to close on 21, back to b/e, got just a peanut.

  13. 6420 was a strong resistance point, as shown on 4th September, looking to get 6460-70 before close

  15. Bee according to IG the last time 17 years ago, the market ended on a positive as stocks rose…

    1. No, I didn’t, I had enough by 15.00 and as my intention was to go short I decided to detach myself from the screen, otherwise I would have made another mistake. I was glad I went away, as where I wanted short it carried on long.
      I don’t trade after 15.00 normally unless I am not busy.

  18. I wonder how much the effect of US losing out 300m per day will affect DOW in the next few days… as evidently not so much atm.

  19. Those idiots over the pond are doing pump and dump again today and as usual those brainless traders in Europe are getting in to the trap…lol…they are so f…. predictable 🙂

      1. if i were being sceptical, then they are simply bringing down the market controllably before having a stunning rise for the final quarter….!?

        1. and who do you think is going to buy at those levels??…unless some retail investors get light headed and buy the Dow or S&P will not go much higher…all those founds are fully invested as they by nature cant sit on cash. However it is in their interest to talk people in to drag the market higher. If you watch Bloomberg or CNBC you can hear them saying why we all should be buying right now but I cant hear them saying WE are baying…

          1. the temptation of the usual end-of-year rally will be enough to bring the herds buying again….i’m guessing !

  20. another one…. Apple is up almost 2% because some very important hedge fund bloke ??(they love to think that way about themselves) told Tim Cook to do 150B buy back!!…..sure, Cook is the kind of a guy who would just go and spend all the money they manage to accumulate over the last 10years ..lol…how stupid are those people??!!lol

  21. C59 likewise shorting is the best option atm, only went long because it was the 1st of the month, otherwise with the US situation its not something to celebrate…

  22. I see quite a lot of people going long, 65% of ig clients on the ftse, wouldn`t be surprised if we got the drop and they get wiped out.
    Like you said ADAM you and your favourite phrase `Pump and Dump` lol

  23. looking to get my 6540 to finish off the day. Some good resistance at 6560, tight stop at 6570, wouldn`t be surprised if it goes up tbh…

  26. Yes, I don`t think the Wall Street will push any higher, so im keeping my short on the ftse with the stop at 6570.

      1. ofcourse 6470 lol… I`m pretty confident yeah, would get me my 15 points and you will have broken even!?!=)

    1. well done ahweb. i closed between 6447-6450. not bad for me today either. target was b/e overall so can’t complain. i didn’t want to hold overnight & last half hour could go either way.

  34. I still don’t understand and annoyed with the fact of WHO IS SLIDING PRICE OVER NIGHT? They have no right, it was my price 6460. But I didn’t take short only for a reason of divi and daily charge.

    1. But longs are riskier in down trend. However this is all we can do here – jump in counter trends.

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