Dip and rise today? Resistance at 6120, support 6056

Good morning.
Market Summary for Friday
The main feature of Friday’s trade was the unexpected decision by the Bank of Japan to adopt negative interest rates to boost its economy.
This move is expected to put pressure on the U.S. Federal Reserve, ECB and BoE to adopt a more dovish stance on future interest rate rises.
Stimulus packages which come out of the blue tend to affect markets in a big way and so it was the case on Friday. The FT100 having already opened quite strongly got another push upwards on a positive open on Wall Street, eventually closing at 6083 for a rise of 2.56%. In after hours trading it pushed higher again to breach 6100 but whether this will hold on the next live open is unclear.

US & Asia Overnight from Bloomberg
Asian stocks rose, with the regional benchmark index heading for its fourth day of advances, as shares in Tokyo extended Friday’s rally after the Bank of Japan stepped up its monetary stimulus.

The MSCI Asia Pacific Index gained 0.4 percent to 121.82 as of 9:05 a.m. in Tokyo, extending its longest winning streak of the year as optimism grew that central banks around the world will support financial markets.

Policy makers took the sting out of the worst start to a year since 2009 for global equities, helping to ease a selloff that wiped more than $5 trillion from market value. The European Central Bank’s indication it could expand stimulus as soon as March was followed by the Federal Reserve standing pat on interest rates and noting its concern over the global situation. The BOJ outdid them both, shocking investors Friday by joining the ECB in imposing negative rates, a strategy once considered unthinkable among central bankers that’s aimed at stoking spending.

“The BOJ’s action on Friday helped — it’s a situation where you get short-term relief when central banks make supportive announcements or ease policy,” Steven Milch, chief economist at Suncorp Wealth Management in Sydney, said by phone. “I’m not sure central bank actions are a panacea, but they do help in relation to investor sentiment. Uncertainty is clearly very high and it is possible that some markets have overshot on the downside. There’s a possibility that risk aversion and volatility diminish as we go forward.”

Regional Gauges
Japan’s Topix index jumped 1.2 percent, adding to Friday’s 2.9 percent surge, as the yen maintained losses near a six-week low. South Korea’s Kospi index advanced 0.2 percent. Australia’s S&P/ASX 200 Index gained 0.9 percent. New Zealand’s benchmark gauge increased 0.4 percent.

Futures on the FTSE China A50 Index added 0.4 percent in most recent trading, while those for Hong Kong’s Hang Seng Index slipped 0.7 percent. The Shanghai Composite Index rallied 3.1 percent on Friday amid speculation the steepest monthly selloff since the global financial crisis was overdone, while the central bank injected more liquidity into the financial system to avert a cash crunch before this month’s holidays.

China’s purchasing managers index for manufacturing may signal continued contraction for January, according to a Bloomberg survey of economists before data due Monday. The National Bureau of Statistics is scheduled to announce the official manufacturing and non-manufacturing PMIs at 9 a.m. local time, while Caixin Media and Markit Economics will release their own manufacturing gauge at 9:45 a.m.

E-mini futures on the Standard & Poor’s 500 Index fell 0.1 percent on Monday. The U.S. equity benchmark gained 2.5 percent on Friday as earnings from Microsoft Corp. exceeded forecasts.

Oil rose as much as 1.7 percent in New York on Monday before erasing gains to trade 0.2 percent lower. West Texas Intermediate crude capped a second week of gains on Friday amid speculation OPEC and Russia will meet to discuss output cuts and other moves to boost prices. [Bloomberg]

FTSE Outlook and Prediction

FTSE 100 Prediction
FTSE 100 Prediction

It looks like Fridays closing strength has carried on through the weekend to today in that we haven’t really dropped back much on the FTSE and Asia had a fairly positive Monday, despite weaker Chinese manufacturing data. There seems to be stimulus being thrown at it from all directions, after that weak January has spooked everyone. BoJ, ECB, Fed, etc are all either intimating or doing something – certainly took the sting out of the tail of January’s falls. Anyway…for today there is a cluster of resistance levels around the 6160 area on a couple of the charts so if we reach this level then I would expect a bit of bearish activity there. With the daily pivot at 6056 that is likely to be the main initial support area today. Above 6160 then there is a rising 30min channel in play with resistance at 6190, though I am not too sure that we will reach that high today. I am thinking that after that strong out of hours rise to 6128, if the bulls step up today then 6160 might be the limit. Back when the FTSE was at 5600 there was resistance on the daily charts at 6120, a level that did look pretty unlikely at the time, but here we are. So, it will be interesting to see if we exceed 6128 at all today, which was Fridays high. Initially I have gone for a dip back to the 25ema on the 30min at 6095 where there is also a PRT support, and as mentioned already below this then 6056 should hold. We also have the HULL 100 MA at 6034 as current support, and with no particularly bearish news about then we may see the buy the dippers coming in. We usually get 2 weeks of bad news flow, then 2 weeks of good news flow, so in theory we are nearing the end of the good news flow… All things being equal I am a bit more sceptical of too much further upside from the 6120 area – its been quite a bounce from 5600 – with 6160 possibly being the limit.

127 Comments

  1. On a short from 6106 Friday evening. Got a feeling this could be an open trade for a while. Target 5621

  2. Morning all.
    I’m with Nick. 6000’s holding are the first real test for the bulls, before trying to break out of the big weekly downtrend, but we’ve come a long way. Could spike up to 6200 without terminally damaging it, if we did that this week it would be a nice overbought short.
    Where’s support? A bit at 50, but mainly around 6020/000.
    RSI got me long at 60 for my first real trade this morning, probably dumping that around now (80).
    DAX looks a lot more bearish that FTSE to me.

    1. Morning all,yes Dax is a bit funny this morning,half expected to see it rally after the PMI’s to make that fall a Bear trap,but hasnt happened despite the as forecast from Europe and better than from Germany.Australia last night couldnt make its mind up but rallied off every dip in the end.

  3. Morning Chaps, trying to overcome my aversion to shorts……..shorted the Dow first thing at 435 and exited at 405 for +30 x 7……left some points on the table but I’m happy to capture part of a move.Presently long Ftse from 69.83 87 and Dax from 87……..it’s needs to regain some composure. Draghi at 4pm tday……more ECB on Weds and Thurs……NFP Fri…. So should be an interesting week.

      1. Interesting thanks WSF…..that second guy…..it just shows how important Emotional regulation is….he did great on the Sim but he lost his composure when he went live….fear of loss grabbed him and suddenly he had to control his emotions…….

        1. Yeah,needing the money,interesting what he said about walking away as a technique and the way the new guys were going on and off the simulator too.

          1. Hey WSF have a look at some of Rande Howells videos on You Tube………. IMO he is on the money…….like that Anton Kriel says as well …….You have to respect money….but be indifferent to it. Just the way I see it……others may have different views.

    2. Hi anstel
      “trying to overcome my aversion to shorts”, then lists four longs….try harder lol 😉

      1. I can’t go cold turkey you know…….its a shock to my system,,,,,,so I had to bring back some normality to my life …..I was starting to feel quite unwell :0)

          1. Looking at the daily FTSE chart,and bearing in mind my agricultural knowledge with charts but it looks to me like 6140 to a possible 6200 is well within the bounds of possibility this week sometime…..especially with NFP on Friday….

  4. Morning all, what a Friday. Woke up poorer and a bad headache on Saturday.

    I think we have seen the top, so was short from 6110 pre market. Will hold them and see what 6050 does.
    Gl all

  5. Morning All,
    Anxious w/e as four RSI Trio trades left open on Friday evening..
    6038 – 6047 – 6082 – 6103. Av. = 6073
    Still trying to get myself together on the management of these.
    Closing 1 out at profit and another at b/e so far just makes the Av. Lower.
    PRT Target of 6023 on the hourly at the moment.

    1. When I do scale up (or down) stuff, I lump them altogether at average as I go along, I find it helps with the focus.
      Brave stuff Hugh 🙂 , that 23 looks highly achievable.

  6. Not looking for a meltdown, but it’s got to post a higher high soon or all looking a bit weak for the 00/20 support to be tested.
    The buying above 6000 on friday looks like purely short squeeze stuff: why buy after a 400 pt rise unless you have to, esp given the fundamentals?

  7. Morning All,

    Nice short first thing this morning on Dax from 845 and limit got triggered at 752.
    Looking to go long at 700 with a stop around 680.

    1. Morning RJ, never a good sign when IG’s Mahony runs out of support levels within 2 hours of posting them.
      Fwiw, his line in the sand for the DAX today is similar to yours, 9696.
      FTSE trying for a foothold at 40, going nowhere till it breaks 55, or one further step down to 20’s soon?
      I’m watching for 1min rsi breaking 60 to 75+, then holding 40 on the retrace to cover short and long, which should equate to 6060/50 if it’s soon.

      2. Hi tmfp,

        It’s not clear at the moment and that is the reason I had my limit on my short at 752 which was like 50% retrace.
        I have removed those Long orders.
        I now have a different plan to short it at 750-60 with stop at 780 if the signals are present. I have not put an order for this but I will post here if I take a short.

    2. OMG, how did you manage to get 845? It’s been a single prick of a price at 7.04. Oh, wow. Is it because it’s R1?

      1. Hi Jack,

        I have 845.5 as resistance on my chart. If you look at the one hour chart you will how price is rejected from those levels. 3 min candle at 7.00 showed rejection which clearly indicated not much of buying or else it would usually fly off following that rally on friday. Immediately put in an order at 844 with a 20 point stop with limit at 752. Lucky it got triggered.

        I don’t use resistance levels from IG charts but my own drawn resistance and support levels from watching the price on the charts over the last two years. My charts have just become crowded with resistance and support levels. One of my to do list is to make a copy of these levels.

  8. wow, looks like I missed all the action Friday, which is just as well as I would have been toasted-reading back on Nick’s analysis from the last 2 weeks-anticipated a rise from 5800s to 6050-6135, oil topping at £35 and then a big leg down for Feb. Short at 6062 will add at 6070 all stops at 6082, target 6020 initially. GL all

  10. 2nd test of the pivot at 6056, think a second break of 6050/56 will see us down to 6020 before Dow open, stop down to 6075 on both

        1. Closed the added short for 30 points. Holding one from 762 with limit at 702 with stop brought down to 750. Off for lunch !!

          Hope the Lunch time rally doesn’t kickin until I’m back 🙂

      2. Imo, 9740 is similar significance to ftse 6050, if they hold a bottom formation is in place, if they don’t then that was a slo mo dead cat rally. Both under pressure now, not looking too clever.

    2. Yes, I’ve noticed that recently, although not so much the last couple of weeks. Might have something to do with option price strikes.

  13. stop moved down to 6060, tempted to double up with a sell stop at 6015 to see if there is any follow through of a break of 6020-any thoughts tmfp, momentum seems strong?

    1. I’m just easing myself into the week, no huge opinion. I wouldn’t get too carried away if I were you, 20ish look technically good support, get a profit in the bank maybe? Well short term oversold….

    1. Well at 6023 I closed my one remaining Trio Short from Friday afternoon.
      All in all in showed a + …
      just wish I hadn’t been so anxious over the w/e & had some belief
      So L now 6019 on the Trio Signal with initial target 6044 which is a 50% move of 6074 & 6014.

      Also eyeing up the Trend line on the 30 Mins which comes in at 5982

      1. Close for 5 (6024) & RSI >80.
        I missed Trio when it popped down at 6000.
        Accepting that – I would have come out here if I’d managed to get on it.

  16. Thanks tmfp, bought half back at 6020 +42 ticks, running 5 short from 6070, stop at 6040 now. No sell stop at 6015

    1. 20 “support” turned out to be disappointing, I think I’m up for a high 900’s long some time soon though.

  18. Same observation from last Thursday tmfp, Ftse now back at 6000ish whereas Dow 16300+ versus 16000 last Thursday when ftse was just breaking 6000. I think your advice was to chop ftse short and run long on the dow-nice call.

    1. Yeah, shame we had a slight misunderstanding, I watched that arb for a while, went quite well for the rest of the day.

  20. Trading is not that difficult from what I found. The secret is to do your homework thoroughly before starting. Lots of reading, following the markets, research, trading on demo (if you’d like). Most importantly, you should start with a sizeable account, ideally £10k to £20k. I myself started with a smallish account and one where I was initially risking significant amount of account size. But once the profits started building up it became easier and easier. I could keep the stake size similar for now but risk less of my account, or increase stake size but slower relative to increase in account size. I am giving up for now because I don’t want to risk the profits I’ve made until I become even more comfortable. Also, I find trading is very intensive. I have not really been able to get much else done since I started trading. I end up watching prices all day and sometimes well into the night. I always wanted to get couple of businesses off the ground, which will take several months to do. Once done, it will be quite passive and I can then get back to trading. I will still need to buy lot of advertising with PPC spend which will constantly require research and tweaking, but not nearly as much as initially.

    In the meantime, I will also be studying to see if I can come up with auto buy and sell signals for the indices. I am comfortable with individual equities as far as entry and exit points are concerned, but indices I would like to automate them. I may also think about direct market access for a more professional out look to trading.

    The reason why so many people lose in trading is because many of them are complete newbies. Most of them are very ill-prepared for it. And when the spread betting firms can see that from their initial trading patterns they go in for the kill, or they realise he/she will dry the account anyway without any intervention from themselves.

    1. Interesting post Anton – Do you not see “trading as a business” ? One which ticks so many boxes you can understand it’s attractions. 🙂

      1. I see trading as secondary for now. Any profits are a nice extra income. I think some of you guys have been trading for some time now and see it more as a business.

        Apart from being newbies, I think another reason why so many fail in trading is due to impatience. They can’t wait for good entry points. They want to make money here and now. It means their trades no longer have the edge they are supposed to have derived from the research. It might be okay for scalping this approach but swing trading you really need to have good entry points I feel or you increase the chances of hitting your stop loss. That or the profits on the trades will be minimal. You won’t be able to have profits that exceed losses, in monetary value.

        1. For scalping, good entry points are essential, but I agree re the “I think it’s going up” and click regardless approach is asking for trouble.

  22. Could be right anstel, closed my short from 6070 @ 6010 +60 x 5, strong bounce off the figure at 6000. See if it can claw its way back to 6035/6040 before assessing another short.

  23. Both 020 and 9696 were touted as good support but broke, be interesting to see if this little rally is “revisit the scene” and down again or that last sell off was an overshoot.
    A combination of big figure low at 6000 and DOW coming up might bring out a bit of buying around here.
    Cash high is really 6100 ignoring that wind up open, only 100 point pull back is nothing these days….

    1. More pressure coming up, final morning’s hurrah for the bears or a leg down to Hugh’s 82 trendline?
      B/e on short, covering and longing there for a turn I think.

  25. Nice trades this morning both targets met while I was not watching.
    Back from lunch first thing I see is a pin bar on the 3 min so long 680 on the Dax. Stop at 660. Mostly last trade of the day that would leave me with 130 points of profit for the day if this gets stopped out.

    1. Closed half for 20 points profit and stop for rest is still at 660. Overall 162 points for the day not a bad start to the week !!

    1. Hi tmfp
      anticipating a probable move to 6068
      but have placed 10 stop at 5999
      and 10 stop at 5980

  29. I don’t think we will see 16200 on the Dow today. Dax should be back to 9800. If not and 660 goes, I will look for short.

        1. Absolutely tmfp, no reason for me to take that trade although my thinking was correct but not the entry. I should have waited for a test on 300. Out of the four trades I had the Dow one was a little nervous because I broke the rule and you do something you know you shouldn’t be doing, it does a lot of damage to your soul than the actual planned losing trades.

    1. It does look like it wants to topple…
      If it does, then lets hope the FTSE holds up, otherwise thats me done for today.

  36. That didnt take long, long 6000, stop at 75. Looking for a bit more when the gitters from Dow opening settled…

  37. Afternoon all. I’m afraid I can’t add anything constructive to this conversation as am STILL sitting on my hands. I’m bearish and think another trip down to 5750-5700 is in order but am a bit scared to put my money where my mouth is as couldn’t understand the rally from 5900!

    1. If you want a bit of short exposure but are worried about it running up, have another go at puts, or keep an eye on buying the VIX on a dip.

  38. Couple of Trios on USD/JPY
    Looking for clues .
    Support was 12091 – 12064.
    Weary of the big range from 11877 to it’s current price 12087.
    This moves in the same direction of DJI and FTSE
    Likewise
    EUR/& Trio S @ 10912 – Inverse direction

      1. Just a thought Paul,if it goes bad at 20x it can hit hard,what do you think about if you can break even on the first one from 15 with the second one from 6000 and just run a 10 x position,less stressful.little and often is safer than big once in a while.obviously if we get back to the 6100 you won’t make as much but might be easier to manage till it makes its mind up.Just my thoughts everyone’s different…..Good Luck.

        1. Hi anstel
          one 10 @ 6000 is at b/e stop
          the 6015 *10 long stop 5980 at present
          but will move to 6000 when price crosses 6040
          looking for a target 6068 or even breaking the highs

          1. Hi Paul,what I found when I started was the more times I had a succesful trade the more overconfident I felt and started to add position size.In my little Head I was thinking how much could I make. Eventually you come to the trade that bites you and because through overconfidence you are bigger size than the earlier trades it can easily wipe out all your previous gains……..if you put your first position on at say for eg 5x then as it gets in profit protect the profit with a stop then add eg 3…… Repeat then maybe 1x.i think it’s called a pyramid so if it reverses the loses are smaller.

      2. That’s why we had that unwritten rule about stating £ per point, it totally depends on what the individual circs of the trader are whether, say, £20 pp is small, medium or big. Also newbies think, Ah, big stakes, he must know what he’s doing……
        Just saying ‘small’, ‘medium’ or ‘large’ indicates how convinced you are about the trade.
        Fwiw, after seeing how freaked you got the other day Paul, with a £25 open position, maybe you’d be more comfy with lower stakes till you get a rhythm going, no-one’s getting rich overnight.

        1. Hi tmfp yes it’s best to not mention position size really because it’s all relative.sometimes it just comes out in conversation though.How was your 300 mile drive at weekend?

          1. Ended up as 800 miles in a high winds and rain and a 207, still knackered and not really with it today.

          2. Bloody hell you must be knackered …..I remember in 1999 I drove to Lands End to see the Solar Eclipse…..did 765 miles in a day and was knackered the next day. At least you got back safe though in the bad weather……that’s the main thing.

        2. tmfp
          see your point of view, and also agree with you to a large degree.
          I suppose mentioning the stake of the trade can be regarded as bravado, but I think all of us are here probably for a little bit of that – a feel good factor.
          However I traded with £ 1 or £2 / point for a long time and got myself into a rut, as the method of trading was inevitably moulded around the stake – stops of 100 or 200 points, and anything below a 100 or 200 point target was a waste of time and effort and more so becoming a swing type trade.
          I think most of us ( I am presuming this ) are day-traders & scalpers, where the stake of the trade inevitably changes the trade / plan / stop / target etc.
          Also I have seen some very constructive criticism at my trades which has helped me.

  40. 16300 DOW defended ok this time, the bounce puts us back in the sell zone with a built in close stop around 45.

  41. Maybe long on Dow was a good idea after all, but stop hunting was a great idea from their side. It is tricky to enter on the last leg because you don’t know where this leg will end. It does look annoying on Dow, the temptation to open SL would be huge.

    1. Yes Jack, I was seeing a base formation at 325 area also my resistance on the chart so went long but classic stop hunting. Never mind always another trade. Not going to try a long.
      Four trades for the day – Two profitable, one b/e and one stopped out.
      I’m done for today. Lets see what brings tomorrow.

      1. Yep, classic downtrust, the same happened to me last Thursday but I opened my stop, but later recovered. At weekend I told myself off, because I should have kept my SL where it was, it would not change my situation in the long run. Another day, another trade.

  42. Now we’ve broken 30 properly, looks like that nice earner 6000-25 is over, stopped my last short for -12 and awaiting developments.

  45. Moved all stop to 6054
    and placed exit for 6068 – a bit of luck i suppose is required for this

    1. I hope so Paul. Just have a feeling things are about to turn. Oil didnt do too well, bit yet the FTSE is rallying. Not entirely convinced of this rally yet.
      Gl mate

    2. Nice one Paul. The good thing is to keep it when it shows a profit and you did well there. Enjoy your rest of the day !!

  47. Oil price falling away again. Nick reckons $16 a barrel possible. If it drops that far wonder where FTSE will be. 5400 or less

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