Fed cautious on rates 6160 resistance and 6125 support

Support 6131 6122 6087 6079 6054
Resistance 6152 6154 6156 6161 6183 6209 6234
Good morning. Interesting Friday session that saw an early sell off rather than a buy the rumour morning, as NFP came out at 1330. A rally from the 6080 support level, largely driven by the US saw the 6150 level once again, which the bears probably thought had been left behind as we dipped below 6100. Mostly the rally was driven by the spectre of delayed rate rises once again, whilst payrolls in the U.S. grew by 215,000 workers last month, more than the 205,000 predicted by economists, and February’s increase was revised to 245,000.

US & Asia Overnight from Bloomberg

  • Saudi Arabia says output freeze hinges on Iran taking part
  • China, Hong Kong and Taiwanese markets closed for holidays

Asian stocks rose as investors maintained bets the Federal Reserve will proceed cautiously on raising interest rates, even as data show the world’s biggest economy is strengthening. Oil slid after Saudi Arabia backed away from a commitment to freeze crude output.

The Asian equity benchmark rebounded from its worst day since mid-February after strong U.S. manufacturing and jobs reports had little impact on speculation that the Fed will hold off from tightening policy until near the end of the year. Crude extended last session’s tumble after Saudi Arabia’s deputy crown prince said the kingdom will only arrest production if Iran does. The yen touched a two-week high as the greenback held losses. Copper declined as bonds rose, while Australia’s dollar slid after retail sales missed estimates.

Odds of the Fed hiking rates by November held at about 50-50 as data showed U.S. manufacturing expanded for the first time in seven months and more workers than expected were added to nonfarm payrolls last month. Risk assets rallied in March amid a pullback in the dollar after the Fed reduced its outlook for rate rises this year to two from four. Chair Janet Yellen reaffirmed the go-slow approach in a speech last week.
“Yellen is exceptionally dovish,” Mark Matthews, head of Asia research and a managing director at Bank Julius Baer & Co. in Singapore, said on Bloomberg Radio. “She’s probably going to let the recovery run hot for a while. This is all great for stocks.”

Markets in mainland China, Hong Kong and Taiwan are shut for holidays. A manufacturing index for India is due.

Stocks
The MSCI Asia Pacific Index added 0.4 percent as of 12:53 p.m. Tokyo time, after sliding 2.3 percent on Friday.

Japan’s Topix index fluctuated, while utilities and health-care stocks led Australia’s S&P/ASX 200 Index to a 0.7 percent advance. New Zealand shares gained 0.5 percent.

Futures on the Standard & Poor’s 500 Index climbed 0.1 percent, following a 0.6 percent increase in the American benchmark at the end of last week.

Payrolls in the U.S. grew by 215,000 workers last month, more than the 205,000 predicted by economists, and February’s increase was revised to 245,000. The unemployment rate rose to 5 percent from 4.9 percent as more people sought work, according to the government data.

“Friday’s U.S. labor market report was something of a middling result for markets,” Philip Borkin, a senior economist in Auckland at ANZ Bank New Zealand Ltd., wrote in a client note. “On the one hand it was not really strong enough to suggest inflation pressures are going to run away on the Fed, but on the other, it certainly still showed, together with a rebound in the ISM, that the economy is still performing well overall.”

Commodities
West Texas Intermediate crude slumped 1.2 percent to $36.36 a barrel Monday, extending Friday’s 4 percent tumble. Brent was down 0.9 percent to $38.32 after losing 4.1 percent.

Middle Eastern equities slid Sunday, with shares in Saudi Arabia dropping to a five-week low, after Mohammed bin Salman, who has emerged as a leading political force, challenged the country’s main regional rival and other major oil producers to take an active role in stabilizing the market. Iran has already said it plans to boost production after sanctions were lifted following a deal to curb the country’s nuclear program.
“If all countries agree to freeze production, we’re ready,” bin Salman said in an interview with Bloomberg. “If there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door.”

Copper dropped 0.4 percent on the London Metal Exchange, with zinc was down 0.8 percent and tin losing 0.9 percent.

Currencies
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was little changed after falling for five days, and was close to its weakest level since June.

The probability of an increase in U.S. rates by December has slipped to 62 percent, from 73 percent a week ago, according to Fed funds futures compiled by Bloomberg. Yellen has said the central bank will “proceed cautiously” when it comes to monetary policy given the heightened risks to the global economy.

“A string of stronger data than this is needed for the dollar to regain its pro-cyclical advantage,” said Peter Frank, global head of Group of 10 and Asian currency strategy at Banco Bilbao Vizcaya Argentinaria SA in London. “Much will depend upon Fed’s perceived reaction function, which seems to be as much a reaction function tied to external factors as it is tied to the U.S. domestic economic outlook.”

The Aussie weakened 0.6 percent to 76.29 U.S. cents, after climbing 2.3 percent last week. Retail sales were little changed in February from a month earlier, a report showed, missing economists’ forecast for a 0.4 percent gain. The nation’s central bank reviews monetary policy on Tuesday, when it’s expected to hold borrowing costs at a record low.

The won led gains in Asia, strengthening for the fifth time in six days. The yen added 0.2 percent to 111.46 per dollar after jumping 0.8 percent on Friday amid the greenback’s retreat.

Bonds
Treasuries climbed, after ending Friday little changed, with 10-year yields slipping one basis points, or 0.01 percentage point, to 1.76 percent.
In Asia, Australian government notes led gains, with yields on debt due in a decade down six basis points to 2.47 percent. Rates on similar-maturity Japanese bonds fell one basis point to minus 0.08 percent. [Bloomberg]

FTSE 100 Outlook and Prediction

FTSE 100 Prediction
FTSE 100 Prediction

There are a few resistance levels on the different time frames around the 6150 to 6160 area so I think if we get a rise to this area its worth a short here. The FTSE 100 was pulled up by the S&P on Friday, however, whilst that has pushed higher to 2073, the FTSE has remained below 6200 (when the FTSE was last at 6200 the S&P was struggling at 2050). Any S&P weakness is therefore likely to see a weak Europe as well. Support wise 6123 is showing as decent support on the 30min where we have a positive, rising 30min coral line, so any dip to this area might well find some support here, at least initially. We also have the daily pivot at 6131. Monday mornings are always hard to pin down exactly but the 6160 and 6130 areas look good for initial moves. The 2 hour chart is still bearish, and is flagging that 6160 area as a short as well, whilst the 10 day Bianca channel has dipped below the 20 day for the first time in a while – so slightly weakening bigger picture. Could be on for a retest of Fridays lows as well early this week.

114 Comments

  1. Morning all,just noticed Draghi is scheduled to speak Thurs afternoon,The Economic and Financial situation in Europe,apparently,in Lisbon 🙂 something to look forward to anyway.

  2. Morning chaps, hope you enjoyed the sunshine.
    Not very convincing grind up so far with the DAX leading and finding it hard work now to get back in the 800 and stay there. Needs to get to 850 and hold for me to get neutral.
    Same with the FTSE at the mo, Nick’s 60 area looks like enough for the time being.
    Just banging on our morning uptrend at 58 now, as is the DAX around 810.
    Waiting for it to go quiet around here unless the new ECB money keeps it grinding up.

    1. Morning tmfp,theres a gap around 9880 which is around a 50% retrace on the last dip too fwiw.

      1. Thanks WSF, I think this next half hour will be pivotal for the rest of the morning. I guess we can say that 60 resistance is broken if we are still above there then.

    1. It does look that way Jack, but I’d like to see it hold for an hour or so, and the DAX get north of 50. Both have run out of momentum for the time being.
      FTSE just bounced off 40 1 min rsi again, has held all morning.
      I have a half short remaining from 72 running it 81 stop. If it survives just may catch the turning tide. Or get Tsunami’d…

      1. It well might do. I was tempted to short for half an hour now seeling signs of slow down, but still waiting for 9872, who knows.

        1. Looking less likely by the minute though.
          Will let it run till stopped, but there appears to be no stopping the DAX.
          I suppose, with a strong DOW (and there’s no reason to suspect it will be weak) a case could be made for a trend day towards the highs.

          1. Anyway, stopped out on that, will persevere picking tops though for the time being.
            Fwiw, Dax now pretty much exactly 50% retrace of 10096-9674.

  4. Morning all……..Dow is at 17815 and Ftse at 6160 as I’m typing……when this Dow sells off next time I hate to think how far down FTSE could go?…..oh well back to what’s in front of us now…….I’m looking for some more fish tmfp so I’m still holding that Dax long from 767 from Friday and I’ve added at 825…..I’m sure this Dax is good for 10100…….Just remember anstel to Take the Money this time numbskull …. Just don’t take it toooooo soon :0) good luck lads…..lets go fishing :0)

    1. Quite likely anstel, although I think that lower low where you bought will damage confidence a bit.
      Both the dax and ftse dailies look they’re on stilts, with the dips being bought because of the Dow, but a lower low puts pressure on the following move to post a higher high. Atm we are closer to 9675 than 11000, it’s up to the bulls to make this rally stick.
      March monday rallies were all followed by weaker tuesdays.

      1. Thanks tmfp…..weaker Tuesday’s right oh I need to consider that if we do get a push North of 10,000…..it’s a fine line between getting out to early and letting it run which I’ve been erring too much on the greedy side….what you said about putting it in a box and forgetting about it on Friday is what I try to do……just working out when to open the box…..very best of luck today ….. To be honest I don’t think you need luck…..you make your own through years of experience…..but GL anyway…. Off back to watch my float and see what’s biting :0)

    1. Yep, ever since Rod Hull’s sad demise it has been bit of a struggle to find work for him. Not even Channel 5 are willing to offer him a role.

      1. 🙂 to be fair though that opening Beak grab he used to do wouldnt survive an Operation Yewtree review.

      1. Daily EMA 200 is around 6193 and FTSE has just refused to cross twice RSI 52 on 1 min chart.
        Let’s wait & see if we will break 80 first or 90 🙂
        I have added to my short at 83

          1. That’s okay Senu, profit is profit and now I am expecting a small bounce to mid-80s.
            Anyways, range is very tight now, will wait for FTSE to jump around 6185 area or 6190.

      1. Absolutely.
        We provide the market with liquidity. sell, get stopped out, sell get stopped out….. 😉
        Let’s hope this 89 sticks for a while. A lower low at 80 on the DAX would test their primary uptrend, with the secondary at 850 if that breaks.
        For that we need some selling, which is notable only by its absence.

      2. Dow is above it’s Fri high,up to them really,someone needs to ask Mrs Yellen if the Dow can come out to play like the rest of the Planet wants to or if everyone has to stay in until May or November.

    1. Someone’s got a never ending bag of tricks with all sorts of surprises that can be pulled out to keep this ride on the Big Dipper entertaining! Gotta smile really havn’t you :0)

    2. Greece has had it. The Med is an economic disaster area on all coasts.
      Just so long as Germany is doing fine, that’s all that matters. #ffs

  14. And the ftse finally puts in a couple of 1 min candles below 40 rsi!

    Low/mid 80’s maybe, then I suppose it’s BTD for a strong DOW again….

        1. Tricky now, how much is a decent pullback?
          6167’s 50%, too much to ask for I think.
          Previous low 75.. a small long here at 82 another at 72, throw the computer out the window at 62.

    1. I just hate to be so impatient. Waited all this 2 hour for it and closed just a minute before it went down.

      1. I just don’t trust it at all, EMA are terrible. Don’t like picking the tops. It’s easier when you see a trend to get in and get money instantly instead of waiting for something. Going to a lunch break.

      3. Hi Jack,

        Yes, just back from lunch still holding the shorts. Looking to take half out at 850.

          1. Thanks Senu. Half out at 50 rest at b/e. Still in with the Dow short with that 15 point stop.

        2. I just don’t have guts to hold. I started doubting it will ever go so came out approx b/e, and still 5 points in a loss today.

    1. Hi Senu sorry been away from screen……no my Dax is back in a box with do not consider opening before 10,000 on it……just gone long on Ftse at 74 though.

    2. Hey Senu from someone who makes a lot of mistakes admitadly…but don’t you think that a 20 point stop on Dax is too tight?

        1. Sorry mate I just hate to see the market taking big chunks out of everybody…..I’m just trading relatively small size with wider stops…..

  19. Is today the day the DOW goes down? I’m very bored of all this rising. I’m going mega short.

    2. Hey Si,if you do go short keep your size small so if it goes against you you can spread out your entry’s……..just a thought mate….you can’t win your money back on one trade unless you’re extremly lucky…..try and work on the trading process before jumping in with half of the UK s gdp per point :0)

        1. Nice just try and hold it now….put a stop at Break even if it scares you or just play it by ear…Surely it’s gotta be a 6200 plus trade if the Dow bounces.GL mate pull some fishes out of this pond,you deserve some :0)

      3. If you’re basing that oversold view on the low 1min rsi, be a little careful anstel.
        Look at the pre DOW opening candles from 14.10 to 14.27, totally flat. That over sensitises the RSI readings, plus the transition from closed to open makes it a poor indicator in those circs.

          1. Hey tmfp got a bit of a problem here…right changed to 1 min Dow to investigate these pre Dow opening candles…First off, is this me being a numbskull again…on my Dow brokers chart it must be in Greenwich mean time because it’s showing those pre opening candles from 13.10 to 13.27……WSF if you can chime in what time is your Dow chart showing….is it an hour behind like mine? ……Second question please tmfp…..how do the flat candles previous to Dow opening effect the RSI and make it over sensitive?……I’m not doubting you for a second but I always like to now how things work and why…thanks buddy……

          3. When you have a bit of time, look at the actual formula behind calculating RSI. It’s up from prev close v down from prev close basically, smoothed out with an ESMA.
            If the market’s dead with only small movement, doesn’t matter what time frame, then insignificant + or – ‘s have the same value as large ones when busy, hence rsi oversensitivity compared to price movement when transitioning from a quiet period to a busier one.

          4. Oh thanks tmfp…..another little golden nugget of this big trading puzzle………I will study how RSI actually works and the maths behind it but it seems to be all in the name of the indicator now I think about it…..Relative strength index……..so it’s all relative to the previous market movements……and the strength relative to those flat candles pre Dow open. So it was sensitive relative to the market being flat……thanks again tmfp, I get it now, good luck as always buddy.

          5. Sorry Anstel,only just noticed,under your name ,Preferences at the bottom is the clock.UTC + 1 = now to get the chart right.

          6. Hey WSF thanks ….I never knew how to do that…it’s all tucked away right at the bottom…..all set now Utc + 1 brilliant that’s two new things I’ve learnt today.cheers and good luck matey.

          8. Yeah I noticed that as well lol!……we need a sense of humour in this game for sure!

  24. Best not to watch the trades once executed. Shorts on Dax and Dow doing really well. Half out of Dow for 94 points.

    1. You’ve got the rhythm going nicely there RJ, I’m struggling here, expecting bounces that don’t come, real hard work.

    2. Easy said than done. I’ve been watching for 2 hours, it was unbearable to watch it creeping up and then I give up when I actually should have kept. I think it’s because I increased my usual stake so I was worried. Fascinating how you manage to hold them. But I am determined to keep learning to hold.

  25. Jack, once you have your stops and target defined you will need to wait. Don’t think too much and talk yourself out of the trade.

    1. I am trying very hard to take it on board, honestly, didn’t expect the right Double Top (12.33) would actually exceed the previous top (10.33). Another day another patience.

  26. So the last half hour of a forgettable day for me…
    Not impressed by the action on any of the three atm, but not really shorting zone on FTSE.
    I’ve got nothing here, DOW might drag us up a little, fairly common their 16.00+ rallies, but sit on hands time I think.

    1. I just recovered Friday’s losses today.
      Waiting for a bounce to 70 or perhaps 80 to short!
      GL

    1. I hope so tmfp. I think we will see Dax in 600s tomorrow. would be good for my shorts 🙂 It would good to look at the Daily charts when US finished.

  29. Afternoon all, been indisposed today but watching with my hands under my posterior.
    Anyway I’ve just sold a little bit of FTSE at 70. Might be silly if we get the Dow squeeze later on.

  30. well i followed Nicks advice, but i had my limit loss stop to close so i am
    out £80 will make that back tomorrow:)

    1. Revenge trading, my kinda trade (just buy shares in IG when i trade, their shares go up and my bank shares goes down)

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