Dead Cat Bounce from 6520 this morning to 6572?

Good morning, hope you had a good weekend. The Ukraine situation continues to weigh on indices whilst the tech stock correction continues as well, dragging the Nasdaq down further. Its quite firmly risk off at the moment (just the right time for a bounce usually!) though we are below the 10 and 20 day Bianca channels, and on the 20 day Raff at 6500ish so if its going to bounce this morning might be a good spot. Might be a bit of a dead cat bounce though as i think we are most likely heading lower towards the summer. On the weekly chart there is support at 6473 (my 2014 outlook that I did back in december had a dip to 6200, possibly 6000, pencilled in for the early summer/late spring) and can be read here. While the “world” situation is a bit up in the air with regards to the tech stock correction and the main one Russia/Ukraine/NATO etc then the backdrop for trading is even more challenging than usual!

Asia Overnight from Bloomberg
Asia’s benchmark stock index swung between gains and losses as raw-material companies declined and Sharp Corp. slumped, while consumer shares advanced.

The MSCI Asia Pacific Index was little changed at 137.81 as of 11:22 a.m. in Hong Kong, having swung gains and losses of 0.2 percent. It declined 1 percent last week. Futures on the Standard & Poor’s 500 Index slipped 0.2 percent, indicating the U.S. equities benchmark index will extend last week’s biggest slide since June 2012 in which the gauge erased its gains for the year.

“Our view remains that a 10 to 15 percent correction in shares is to be expected at some point along the way this year,” said Shane Oliver, who helps oversee about $130 billion as Sydney-based head of investment strategy at AMP Capital Investors Ltd. “But it would be just a correction in a still rising trend. Any such dip should be seen as a buying opportunity.”

Hong Kong’s Hang Seng Index (HSI) retreated 0.1 percent and the Hang Seng ChinaEnterprises Index of mainland shares listed in the city lost 0.5 percent. Singapore’s Straits Times Index rose 0.4 percent and Taiwan’s Taiex Index slid 0.6 percent.

Indicators suggesting China’s economy expanded in the first quarter at the slowest pace since 2009 have spurred speculation the People’s Bank of China will cut banks’ reserve requirements for the first time in almost two years. PBOC Governor Zhou Xiaochuan said officials “don’t have to roll out significant policies” when growth is within normal ranges.

U.S. Rout
Citigroup Inc. (C) is due to report earnings today after JPMorgan Chase & Co. declined 7.5 percent in the week through April 11, the most since May 2012, as profit declined. The Nasdaq Composite Index last week capped its worst week since 2012 amid concern valuations have climbed too high as earnings season starts.

The MSCI Asia Pacific Index last week traded at 12 times estimated earnings, compared with 15.5 for the S&P 500 and 14.4 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

FTSE Outlook

FTSE 100 Prediction
FTSE 100 Prediction

As mentioned above I wouldn’t be surprised if we see a bounce initially, though its most likely to be of the dead cat variety rather than a relief rally on anything sustainable. I think today will play out simply as a rise then dip and the dip to continue for a while as short the rally mode kicks in. Gold continues to climb well now its pulled away from the 1300 area (finally!) and should be on course for 1500 at some point this year. That will see considerably weaker indices as fundamentally the issues that caused the credit crisis haven’t really gone away (over leveraged debt in most cases) so if there was to be a credit crisis 2 its going to be even worse.

Anyway, for today, looking at the 30 minute chart the if this initial 6520 area holds then we could get a climb to the resistance at 6572. With the daily pivot at 6580 i think the FTSE will be hard pressed to push above that (especially as if it does reach that it will have put on 50 points whilst the underlying backdrop is pretty weak). With the current weakness around I expect us to break 6500 soon and the next supports are 6490 and 6420.

51 Comments

    1. Good call on the rise though Nick. Didn’t quite reach the level you mentioned but the directions again to day have been spot on!

    2. Hi Nick,

      You find some great resistance levels.

      You think with Ukraine worsening we will see 6475 today, current low 6507.

      thanks

  2. I believe the 6500 level is quite hard to pass but a slightly drop above 6500 for today. It may bounce a bit tomorrow to 6550-6570

  5. GG/Luke. COuld I ask why you will buy at 6500?

    I see the previous support at a clear 6490?

    Just asking as want to understand…

  6. I’m short 6580 from last week and 6550 & 6540 today so was looking to see what the sentiment was that’s all. Put stops above today’s high at 6565 which is B/E. I just feel that the risk reward is for a push lower and a daily close below 6500 in Ftse and daily close in the s&p below 1808 would be very bearish
    GG

  7. My life is fucked because of spread betting. I am broke because of Ukraine. I put a very big buy order around 6600 and now I just cannot take the loss any more. I am just waiting for the margin call when the index hit 6450 maybe in 2 days… Good luck guys. Hope you enjoy the gain:(

    2. With a bit of a spike up and all of the indicators pointing down. You know what you need to do..

  10. I was on “sell the rise” first thing but it didn’t go high enough so thought had missed it. Surprised to see it back near 6550 again. People still feel this is another dead cat bounce ?

  12. im in a bear mode, this whole week high prob to drop below 6500 due to reports out (mainly china GDP coming out shit)…looking to short tops.
    have a decent short from 6550

      1. Hashmash,

        where do you have your stops set?

        I expect when you say you have a decent short from 6550 I expect you mean big and have protected yourself.

        thanks Nick

        1. i have a large stop on this one.. i have 4x my minimum risk on it (max risk is 10x).
          I wouldnt be surprised to see 6570ish either today or tomorrow, so i am prepared for that..my stop would be a daily close above 6600 or an intraday breaking 6600 upwards with good enough strength.
          I am expecting to see 6450ish this week.
          Today and tomorrow I expect dips in morning and rise in afternoon and then overnight tuesday through wednesday to drop in that 1% range.

      1. well i dont average always..but if u position urself right then yes.
        Reason im averaging down is becus i dont want to miss the down trend…
        also i have a fixed loss for my agg positions so i dont need to worry about it.
        shame i missed the 6580 (only reached 6577), but for that pos my SL will only be roughly 20-25 points…

  17. Lost big this morning, had a huge long.
    Back to break even on spreads.
    Only putting on small stakes and topping up when they go my way.
    Currently short, will short even more soon.

  18. Nick

    I am finding it difficult to understand your prediction.
    Do we go Up now or is it all the way down now that
    your 6572 has been reached? Is this really a dead cat bounce ?
    How have you traded this please ? Have you gone long
    from 6520 ? of are you short from 6572 ?
    A bit confusing – how you have written or drawn the chart?
    please explain if possible !!

    1. My trade plan for today was:

      – Risky morning long at the current 6520 area, target 6572, stop 6506
      – Short 6572, stop 6586 target 6491 or lower (ended up taking 15 from this rest stopped at b/e)

    1. I am still pointing down but no position – should have shorted the rise to 6572 earlier but always nervous opening within an hour of the US open. Am not strongly down so would only take 1/3 of my position maximum at the moment – just when you think it is trending one way it strongly reverses!

    1. Classic signs

      1. 30+> – no down trend
      2. New buy signal triggered on higher timeframe]
      3. Higher high set
      4. Emphatic rejection of move down – V-type rejection
      5. Lower timeframe – up momentum
      6. new formation set-up – Only Higher Low

      there are more specific signals as well

          1. Dangerous thing to do! Glad I didn’t short in the end – to be honest its a bear trap one day and a bull trap the next at the moment. Probably still bearish but it would only take a 30-40 point rise to get me bullish again so not going to do too much till this trends one way or the other

          2. Infact with the sell off Friday evening and overnight last night – with the Ukraine situation worsening I was expecting quite a sell off – not an up day! Am not convinced the sell off is done – I hold quite a proportion of midcap UK stocks, somewhat less than I did two months ago as I took some profit off the table and they have broadly continues to go down today.

  22. I am with Hash on this expecting 6450 to be touched before a bull run up to 7000 and then the BIG drop off later in the year.

    1. yup seems like it that way, lets see if it plays out.
      no need to rush into a short, have a whole day tomorrow and we will see 6570s a couple time :).
      I’m relying on wednesday to get that 1% drop

  23. haha looks like its heading to next resistance of 6632…
    ive closed half my short so far at a loss ofc (nothing new 😛 )

  24. Yeah just rerun my momentum measures and I am bearish on 1 daily timescale and bullish on 4 hour which for me means no clear trend – ie back to “no-mans land”. So will equally buy the dips as well as sell the rallies if it starts where it ended tomorrow. It has changed every day for 5 days now so which is most unusual and a tad annoying as it means a lot of watching and effort for little or no return!

  26. l am long 6575 to 6598 then shorting anything above that dont think it will go much above 6600

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