Good morning. Well yesterday went according to plan to start with the drop of the pivot area but then the bulls staged a remarkable comeback didn’t they! I must admit though that it feels a bit false and I think it might just be getting driven up ready to fall on Friday from a higher level on NFP news, but for the moment (today really) it does look bullish. Its still eyes on the NFP tomorrow and also Syria after the Senate Foreign Relations Committee voted to authorize President Barack Obama to conduct a limited U.S. military operation in Syria, the first step toward congressional endorsement of the effort.
Asia Overnight from Bloomberg
Asian stocks rose for a sixth day, led by Indian equities, and the rupee strengthened after the nation’s new central bank governor outlined plans to bolster the financial industry. The euro weakened before central bank meetings in Europe and the U.K., while Treasuries fell.
The MSCI Asia Pacific Index of shares added 0.3 percent to 133.56 as of 2:17 p.m. in Tokyo, heading for its longest rally since December. Standard & Poor’s 500 Index (SPX) futures added 0.1 percent. India’s S&P BSE Sensex jumped 1.9 percent, while the rupee appreciated 1.2 percent against the dollar. The 10-year yield on Treasuries added one basis points to 2.91 percent, and the yen slid to the brink of 100 per dollar.
Reserve Bank of India Governor Raghuram Rajan announced plans to make it easier for banks to open new branches and lend to non-state sectors. The European Central Bank, the Bank of England and the Riksbank will all leave key rates unchanged today, according to economist surveys. U.S. jobs data tomorrow may provide clues to the Federal Reserve’s outlook for stimulus after its Beige Book survey showed consumers spent more on travel and tourism while manufacturing expanded. A U.S. Senate panel authorized a limited military strike in Syria.
“There’s optimism India’s new central bank will help get the house in order,” said Jonathan Ravelas, the chief market strategist at Manila-based BDO Unibank Inc. “These gains in emerging market assets indicate some recovery in investor confidence. It’s probably a temporary respite until the start of tapering in U.S. stimulus and the war in Syria worsens.”
US
The U.S. economy maintained a “modest to moderate” pace of growth from July to August, the Fed said yesterday in its Beige Book survey. The central bank, which has said cuts to its bond-buying program depend on continued improvement in the economy and job market, will decided to reduce purchases at its September meeting, according to 65 percent of economists surveyed by Bloomberg News Aug. 9-13.
Data today may show claims for jobless benefits fell to 330,000 last week from 331,000 in the previous period, according to a Bloomberg survey. Nonfarm payrolls data on Sept. 6 will probably show an increase of 180,000 in August, compared with an gain of 162,000 for July, another survey showed.
“U.S. payrolls is the key event, we’re looking at something around 190,000 and if we get that sort of number it reinforces the idea of Fed tapering occurring at the upcoming meeting,” Chris Green, a strategist at First NZ Capital Ltd., a brokerage and wealth-management firm, said from Auckland.
Dax
The Dax came fairly close to the 8070 support level mentioned yesterday before a pretty impressive bounce as well. Further movement today above 8212 has target 8252 with secondary, if exceeded, at an unlikely looking 8313 points.
S&P
The S&P is looking at a possible 1664 if it can get and hold above 1656. After that 1669 is the next resistance level. To go bearish a break below 1640 would open up some downside again, and probably quite a lot (the sub 1600 I mentioned yesterday)
Gold
Met the levels mentioned yesterday but something odd happened with the price of the metal toward the session close on Wednesday. There’s now a risk of any weakness below 1385 ensuring a trip to 1366 USD
Outlook
There’s no denying that in the short term its pretty bullish with yesterday’s climb off the lows, however the bulls still have their work cut out as we are still near the top of the various daily channels – 6530/50 area for the Raffs, 6523 and 6545 for Bianca, as you can see below. 6480 marks the top of the declining trend line since the beginning of August so breaking out from here could test those daily channels and with pre market looking at opening about 6494 its looking likely that the bulls will take the FTSE a bit higher yet. I have plotted the arrows below based on 6480 holding and a test of the Bianca 10 day channel at 6523 but as mentioned below we may see those Raff levels too. Generally I think today will have a slight bullish bias with a case of “buy the rumour” for a decent NFP figure, but with some decent longer term resistance levels not far away there are some decent shorting locations too.
Just now lost 14.5 points, took long 6501.3 and it continued dropping. Didn’t expect this short at all.
I thought it was just a retracement.
you’re too impatient Jack, gone long at 6482, still bullish breadth, potential support at 6480, 20WMA, 100DMA.
well, I already lost more on it.
Al, your support has gone at 6480…you stopped out mate? Hit 6458..
Sorry, just read that you have…
I don’t understand which way it goes now.
that’s normal for markets!
me stopped out too, as I said you can’t win them all…
reentered long at 6460, stop 6440
What’s your TP AL? 6500?
6500 first target yes, just closed in fact at 6505, for +45pts
after losing -20pts on previous trade.
Thanks for sharing your stop loss. I thought you had 10 points stop loss as I remember you like it.
I shorted this morning at 6535 – using fibs retracment target was 6475. Now set up a short trade at 6563 (target 6440) if market goes against me.
Just for clarification who may think I propose crazy trades against the trend – I’m not a day trader. I trade on a monthly basis. So if the market does move against me I may try to average down by picking out intraday or short term opportunities. I am bearish for September but a lot depends on Friday.
Market is crazy. Why Ft down?any idea?loss agian.
Market is crazy.
Why Ft down?
any idea?
I agree Terry…it’s a joke! I got caught out this morning, had a short from 6507 at £7pt, then had a paper loss of £266 when it hit 6545, and was glad to get out with a £20 loss on the way down. But if I hadn’t closed at around the 6504 level, I would be in profit of £322 (6458). But I was not expecting a near 100 point 1 way drop from 6545 to 6458. I thought it would retrace to 6500 then go back up to 6550. Indicators are useless in telling you these type of quick turnarounds. Too slow!! A funny market indeed. All swings and roundabouts 😉
Nick, well done, good call today mate with the drop from 6520 to 6460 (touched 6458). Went a little higher to take out the stops-touched 6545. I see indecision at the moment, the market cannot make up it’s mind, seem to be trading in range of 6390-6550 for the past week or so. I think NFP on Friday will change that and the Syria conflict when hostilities start. You needed extreme courage to go for the long at >6500….was unexpected…but gave 45 points for half hour only, so you had to book the profits quick! 🙂
True. It’s funny yesterday’s rally was put down to Syria worries being on the backburner and any fall today will be attributed to uncertainities about Syria!
Syria hasn’t gone away and it is virtually certain that the US will strike in the next week or so but the market has such short term memory! Of course the market may well rally after the attack but underlying uncertainty of the conflict will remain.
It makes it very difficult to trade intraday and I truly respect the daytraders here. Overcoming our personal psycology is the biggest barrier to successful trading. Jack, in particular, you may want to step away and smell the roses sometimes……..it might help. As somebody else said – maybe set up a trade with TP and SL and then go away from the screen. I know I often left points on the table when I have traded too soon.
Thank, al, Tee for helpful encouraging comments in last day posts.
I see what you mean, trading plan. I don’t always follow it. I get easily spooked by a sudden price movements, have moments of fear and uncertainty which forces my hand to hit the close button – it could be winning or losing trades. I think it mostly comes from fear to lose stop losses. If I lose the trade I make myself a target to recover these money on the next trade which I may enter without thinking of the trading plan. Like today, it was a good trade I entered but when I recovered my previous loss I came out. And it is hard to enter another trade as it could be a losing one (it normally is).
So basically you are staying b/e for a long time until an almighty trade comes which pushes you a little bit forward.
It’s like now, I want to close this long as I don’t know where my target will be.
And Juppy, I closed it again. Now I’m only -6 points from the start of today and -9 points from where I was when I lost a previous trade, and of course I am still -38 points from the middle of August (the current ever top of my account) when I lost on one of the trades, I can’t even remember what the trade it was, I just remember writing how gutted I was. So if I recover to the mid of August I will start making profits again. Is this how you think about money?
and here we go. shouldn’t have.
And we are off to the races again….6458 to 6503…in 1 straight swoop…obviously the algos are on on today 😉
Jack – you are not alone. I recommend you read a book on trading psycology. If not at least look at how our cognitive biases may affect our tarding. Here is a good article:-
1. Confirmation Bias
This is a fatal flaw of trading; we tend to surround ourselves with information that validates our own point of view and dismiss input that conflicts with our reasoning (also known as cognitive dissonance). This is the primary reason why we always strive to see “both sides of every trade” as the residual grist between variant views is where education—and profitability—resides.
2. In-Group Bias
This is a manifestation of confirmation bias, or the tendency to surround ourselves with those who share similar takes on the tape. This could pertain to our physical environment or a virtual experience, such as Twitter. Not only does this provide a false sense of security in our individual viewpoints, it makes us suspicious—or angry—with outsiders who dare to question how we feel. (See also: The Gold Scold.)
3. Gambler’s Fallacy
One of the most famous disclaimers in finance is that past performance is no guarantee of future results. This bias is often referred to as a “glitch” in our thinking in that it extrapolates what happened in the past to construct an idea of what will happen the future. How many of you have played roulette at a casino under the premise that a string of red increases the likelihood of a black outcome? That’s flawed thinking; the odds of red (or black, for that matter) or 48% on each independent spin.
4. Post-Purchase Rationalization
One of our Ten Trading Commandments is that the definition of an investment should never be a trade gone awry. Nobody initiates market exposure expecting to lose money, but we should never post-rationalize our risk (such as ignoring stop-losses or throwing good money after bad). We would be wise to remember that good traders know how to make money but great traders know how to take a loss.
5. Neglecting Probability
History is littered with stretches where in hindsight we’re reminded not to confuse brains with a bull market. This bias limits our ability to properly assess risk, whether it’s overstating an unlikely event (such as buying a stock for a takeover) or understating an unlikely event (such as Y2K, the fiscal cliff, or a terrorist attack). Tail events do happen, of course, but betting on an outlier is a long shot by its very definition.
6. Observational Selection Bias
This is when we suddenly notice something we haven’t noticed before, and wrongly assume the frequency has increased (when it hasn’t). Let’s say I bought cannabis stocks as a way to play (what I perceive to be) the legalization of marijuana. All of a sudden, everywhere I look, there are more and more signs that support my thesis; the topic is featured on 60 Minutes, it’s a hot-button issue during the election, it gained momentum in the mainstream media. While some of that may prove true, I am on the lookout for news, whether it’s conscious or not.
7. Status-Quo Bias
Most of us are creatures of habit in our own way; we use the same toothpaste or align with a particular smartphone device. That routine often extends to our investments in the marketplace; we’re comfortable with the stocks (or indices) we often trade and often miss opportunities outside of that comfort zone for fear of the unknown. Change isn’t only positive, it’s inevitable.
8. Negativity Bias
Let’s face it: We live in a sensationalist society where scare tactics and negative headlines garner the most attention. If you doubt this for a minute, turn on your local news tonight. Scientists theorize that we perceive negative news to be more important than positive news. The risk—for the bears and for humans as a whole—is the tendency to dwell on bad news rather than embrace good news, and there’s the added twist that the stock market is widely considered to be a leading indicator.
9. Bandwagon Effect
How prevalent is this when it comes to the financial markets? They teach it in college as a stylistic approach (momentum investing)! Nobody in our business—or in the media—wants to miss a move in the stock market, and history is littered with bubbles and busts that demonstrate this bias in kind. In life, this is driven by our innate desire to “fit in and conform”; in the markets, it’s driven by two factors: fear and greed.
10. Projection Bias
This is predicated on projecting our thoughts and beliefs onto others and assuming that others are wired the same way (they’re not). This can lead to “false consensus bias,” which not only assumes that other people think like we do, but that they reach the same conclusions. In short, this creates a false consensus, or sense of confidence when in fact one doesn’t, or shouldn’t, exist.
11. The Current Moment Bias
This is a direct descendent of the immediate gratification mindset that dominated society for many years—and some will argue that the government is currently operating in this mode, mortgaging our children’s standard of living to achieve short-term fixes. In short, we want to live as well as possible and pay for it at a later date (as evidenced by the level of debt and our growing deficit). The housing crisis was rooted in this bias, as is the basic concept of leverage.
12. Anchoring Effect
This tendency, also known as the relativity trap, compares a situation to a limited sub-set of information; it’s when we focus on a number or value and extrapolate it to a current situation. This often manifests in the marketplace through the fundamental metric, when we observe that a stock is “cheap” relative to its peers or a historical precedent (also known as a “value trap”).
Top article Javed 😉 Good reading….Jack will find it amusing 🙂
They are mad today!! Up 60 points on nothing then down 100points and now again 60 points up….and on what??…lol
Over 230 point move in total in the FTSE this morning, and it’s only 11.35am and BOE/ECB and U.S. ADP figures are not out yet… lol
Great post Javed
Well done Al.Good trade. 🙂 Crazy mkts today. Big up…big down…big up? Dow going to the moon…another rally today….what happened to ‘investors are waiting on the sidelines cautiously in anticipation of NFP tmrw? That’s the nonsense you hear on CNBC…do they not look at the screens regards indices?
does anyone think the market will go to 6545 by 4.30?
Sure, just like it suppose to drop to 6445 yesterday…lol
Hope not, I have a short from 6520 🙂 TP 6490
well ftse seems to be pushing up from nowhere these days but trust me we are looking at a big drop. im short from 6529 tp 6465
Dow and S&P having a real struggle to maintain their gains but find support at flat for the day.
If the usual retracement occurs later then if the DOW can go through 14,925 it may fall to 14900 and 14,880.
For the FTSE that would be around 6511.
With everything happening out there how can FTSE be 57point up today!! A bloody madness
i’m short from 6520, stop 6540, less participation in rally showing bearish divergence, resistance at 6530.