Fed rate rise June 6130 resistance Bears out to play

Support 6098 6089 6030 5969
Resistance 6130 6137 6144 6171 6189 6200
Good morning. Federal Reserve officials want to raise interest rates in June. Now, it is up to the U.S. economy to confirm their view that slow growth in the first quarter was temporary. Minutes of the April 26-27 Federal Open Market Committee meeting released Wednesday in Washington used the word “June” six times in a policy context. That signal follows several speeches by regional Fed bank presidents warning investors not to dismiss a mid-year hike after the odds of such a move edged close to zero. Meanwhile in the UK, the number of people in work hit a record high in the first quarter, though experts said modest jobs growth and a steady unemployment rate suggested the market could be “cooling off”. Employment rose by 44,000 in the three months to March to 31.58 million, according to the Office for National Statistics (ONS).

Fairly decent day trading yesterday with the 6120 area holding as support till the Fed minutes later on. The bulls didn’t manage to get above the 6170 level, though the divi brought the hunters out a bit earlier for a big jump at 3pm, and then just a slightly smaller one between 4pm and the bell. 6100 held not he Fed news, though a break of that and we will likely be seeing 6000 fairly quickly.

US & Asia Overnight from Bloomberg
Asia’s shares, bonds and currencies fell along with commodities after minutes of the Federal Reserve’s last policy meeting put the prospect of a June interest-rate hike firmly on the table. A gauge of the dollar’s strength held gains following its biggest jump in six months.

The MSCI Asia Pacific Index sank to a six-week low, while U.S. and U.K. stock index futures fell. Singapore’s 10-year bonds dropped by the most since April following this year’s steepest declines in U.S. Treasuries. Currencies in Australia, China and South Korea sank to their weakest levels in more than two months after the Fed record showed most of its rate-setting officials were in favor of boosting borrowing costs next month should the U.S. economy continue to improve. Crude oil fell for a second day as copper sank to its lowest since February. Gold and silver slipped to fresh lows for the month.

The Fed minutes provided a jolt to markets that had until Monday all but ruled out the prospect of U.S. interest rates being raised in June. Fed Funds futures show the odds of such a move surged to 32 percent on Wednesday, after tripling to 12 percent in the prior session as data on inflation, housing starts and industrial production exceeded economists’ forecasts. The shift comes ahead of a meeting of the Group of Seven finance ministers, where Japan is likely to push further fiscal spending as the answer to tepid global economic growth.

“The minutes showed that the policy makers’ desires to raise rates in June exceeded the market’s expectation for action,” said Mitsushige Akino, an executive officer at Ichiyoshi Asset Management Co in Tokyo. “The U.S. economy is doing so well that the FOMC can hike rates. But the global economy is on the decline and investors are not sure whether the Fed can really increase interest rates or not.”

An index of leading indicators in the U.S. is due to be released on Thursday, while the U.K. will report on retail sales. Australian figures showed the nation’s unemployment rate held at a 2 1/2 year low, while the Philippines announced first-quarter economic growth that was the fastest since 2013. Fed Vice Chairman Stanley Fischer and New York Fed chief William Dudley are scheduled to speak, while earnings are expected from companies including Wal-Mart Stores Inc., Merck KGaA and Royal Mail Plc.

Stocks
The MSCI Asia Pacific Index declined 1 percent as of 1:35 p.m. Tokyo time, led by slides in raw-material producers and energy stocks. BHP Billiton Ltd., the world’s largest mining company, dropped more than 4 percent. Inpex Corp., Japan’s largest oil and gas explorer, tumbled by the most since February.

Suzuki Motor Corp. rebound 3.9 percent, after sliding 9.4 percent on Wednesday. The company elaborated after markets closed that its improper testing methods wouldn’t result in changes to the fuel-efficiency ratings of its vehicles. Tencent Holdings Ltd. fell the most in two weeks after Asia’s biggest instant message company said uncertainty about China’s economy could cause near-term challenges for its advertising business.

Futures on the S&P 500 declined 0.2 percent, while contracts on the U.K.’s FTSE 100 Index slid 0.7 percent. Monsanto Co., the world’s largest seed maker with a market value of $42 billion, said it received an unsolicited takeover approach from Germany’s Bayer AG.

Currencies
The Bloomberg Dollar Spot Index was little changed, after jumping 0.8 percent on Wednesday to its highest level this quarter. The Japanese yen gained 0.1 percent to 110.06 per dollar, following a 1 percent slide in the last session.

“While the risk of a June hike can no longer be ignored, this isn’t an environment where the market will aggressively price in odds higher than 50 percent,” said Yousuke Hosokawa, head of the currency sales team at Sumitomo Mitsui Trust Bank in Tokyo. “That means it’s hard to buy dollars aggressively above the 110 yen level.”

Australia’s dollar weakened 0.3 percent, while currencies in Indonesia, Malaysia and South Korea dropped by about 0.8 percent. South Africa’s rand fell 0.3 percent, after tumbling 2 percent in the last session. Malaysia, Indonesia and South Africa are set to review monetary policy on Thursday.

Bonds
The yield on Singapore’s 10-year bonds jumped eight basis points to 2.07 percent, while that for Australia’s debt climbed seven basis points to 2.35 percent. Yields on similar-maturity U.S. Treasuries rose two basis points to 1.87 percent, after surging eight basis points in the last session as the Bloomberg US Treasury Bond Index slid 0.7 percent.

The Fed is steering the market into line with its views, said John Gorman, head of U.S. debt trading for Asia and the Pacific at Nomura Holdings Inc. in Tokyo.

“They did a very good job,” he said. “I’m still not sure they go in June. In my mind, I’m absolutely positive they go in September.”

Commodities
West Texas Intermediate crude dropped 1.2 percent to $47.63 a barrel, extending Wednesday’s retreat from a seven-month high.
The dollar’s increase coupled with renewed concern over the global oil glut unsettled markets, with U.S. crude inventories unexpectedly rising by 1.3 million barrels last week, according to data issued on Wednesday. Rain in Canada may have also slowed fires that have shifted back toward the province of Alberta’s oil-sands operations.

Copper, nickel and lead fell by about 0.4 percent in London. Gold declined 0.1 percent, after a 1.6 percent slide on Wednesday, and silver was down 0.5 percent. [Bloomberg]

FTSE 100 Outlook and Prediction

FTSE 100 Prediction
FTSE 100 Prediction

For today we might see some selling pressure start to build; the bulls failed to break through 6170 yesterday, though they did a good job of defending the 6100 level. We have dipped below the 10 day Bianca channel and the bottom of that tallies with the daily pivot at 6130 so I feel that a back test of this channel is worth a short to target sub 6100 today. There are a few resistance levels at 6140ish, so the bulls will be keen to break this level, and if they do then 6190 is a possibility. However, the ruling trend for the short term is down so I still feel that shorting the rallies is the best play at the moment, to target 6030 or lower. We have a red coral on the daily chart now with resistance at 6280 so am keeping half an eye on that level if the bulls were to put on a charge. After what turned out to be quite big news from the fed with the possible rate rise next month (though only 32% chance at the moment) we might have a bit of a funny day as that is digested and various “models” tweaked.

100 Comments

  1. Morning again….re instated one of my longs at 92 ……see if I can get a few of those lost points back.

      1. Thanks tmfp I seem to have got a bit stuck again…..thanks you can read me like a book…

        1. You started the week with the best of intentions, got success, then made the cardinal error of shunting red stuff into the box.
          That +66 pts or what ever it was should have gone into the fighting fund and paid a couple of small stop outs.
          It’s quite cathartic to get stopped out from time to time, (not recommending making a habit of it), it shows yourself that you recognise you can be wrong, stops you getting dogmatic about being right.
          You are misinterpreting your vids, having confidence in yourself is different from having blind faith in your actions.

          Case in point now, you made a good buy, refused +20 and are now minor red. Read any tactician, war or whatever, they all say the grand gestures don’t win battles, being flexible and thinking on your feet do.
          I don’t like nagging you, but you have to “get it”.

          1. No …..I know you are right tmfp…keep nagging me please…it’s really good I appreciate it many thanks….Its those pre conceived ideas have come back again…..sometimes I do get that rabbit in the headlights thing still……I just need to start pressing buttons and taking blue like you said.

  2. Hello guys.
    Watching tick by tick that opening 15 minutes was quite well traded and ended up with the bulls giving ground, so I’m looking for the 20 area to continue to resist this morning. We just retraced 50% of the drop to around 03 and look like bouncing off it, so pressure still on.
    9800 held ok on the DAX, so that’s my range for the time being.
    All three indexes still in their trading ranges so logic says for medium term traders, look for dips to buy.

    1. Gone a bit early, longed at 6100. Think I’m going to bring the big guns out so limit buys at 075, 050 and so on.

    2. Morning all,Friday 13th low 6060 would be an interesting hit or miss off G.B Retail sales at 09.30.

      1. Morning chaps.
        Yeah, chippy if you think the bull case is still good, light scale down buying’s the way to go today I guess.
        Had a good break from the screens WSF?

          1. Thanks,does seem a bit, “no plan survives first contact with the enemy” at the moment 🙂

        2. Thanks,yes,fresh air,Vitamin D,Apple Pies it was really good 🙂 amazing how much free time there is when whatever you do doesnt have anything to do with Screens.I even went in the Supermarket and found stuff I didnt know you could get there, like Cheese with Jalepeno peppers in it and luxury Scotch Eggs.Supermarkets seem to be what retired people do Midweek instead of Libraries nowdays.I guess that is the Consumer Economy they keep telling us about,not just Computer Games and phones and fast food,the aging demographic and what they do.

          1. “Luxury Scotch Eggs” lol…….the Pinnacle of Western Civilisation.

            It’s not just the oldies, when I visit relatives in Essex, young families go to Bluewater FOR A DAY OUT.

  5. That’s bearish action from the DAX with a capital B, no immediate retrace not good at all.

  6. To combat the Murrican snake oil stuff, first in a series of highly irritating hippie type quotes from one of the wisest men that ever lived

    “An ant on the move does more than a dozing ox.”

    This ant just covered some short at 72, but I’d be surprised if that’s the low for the morning.

    1. That’s a good saying…..I’m going to put that in my rules under all the other sayings…..trend is your friend etc…..etc….they are good things to remember…

    2. Well I’ve just bought some more at 75 – give those nice people at IG a nice turn.
      HSBC – As mentioned ages ago I had a fair few of these, went ex-div this morning and gained div and a couple. Too much for me to bear, closed it!!

    1. Think it is the Minutes from the april Meeting,maybe some news on Corporate Bond buying etc etc something is keeping Deutsche Bank over its s level from April,Dax too come to that,compared to Ftse and Dow i mean.I still think DB is a clue re Dax/Europe,just cant find a way to apply it 🙂

        1. Apparently it’s the 42nd G7 summit held on 26th and 27th of May in Japan….I have no idea what effects it will have on the markets though……

          1. They are probably right though,anything interesting will get credited to the Bosses in a week,not the Finance Ministers this week,even if most of them havve more professional relationships/are more professional than Blair and Brown were.

  8. Morning folks!! managed to get some div yesterday.. This doesn’t seems to be done yet, will stalk like leopard from the top of tree to get the bottom …lol 😛 have a good day

  9. DAX fighting back better than us. A break and hold of 800 might stretch to 840 slowly.
    As always with range bound markets, looks terrible at the lows and great at the highs.
    What you do here is based on whether or not you ignore the trading principle of never second guess a break out.
    Big gaps to fill, 40+ on the FTSE and potentially 80+ on the DOW…
    Still running half a short, stop at 85, maybe 70 will hold for the rest of the morning.

    1. Well the break of 800 stretched to 840 a bit quick lol
      Stopped out but replaced at 91, out at 85, off for a stroll in the sunshine.

      1. Better make it quick tmfp, it is just about to tip it down.
        Doesn’t seem to want to offer me any at 50, 70 seems to be a bit of a barrier so bought some ftse/dow difference at 11350.

        1. Sounds like you’re expecting a DOW rally later then chippy.
          In the very short term, I’d expect 70 to hold till just pre DOW at least, with the morning’s 50% retrace and previous rally high around 92/95 to be a bit of resistance in the meantime, but the DAX might drag us through that.
          That’s what I’ll trade off for the next hour or so anyway, but all square right now.

          1. Plan is dow to regain/hold 500 which’ll keep us in the ’90s. If I had any real idea about charts I’d say that yesterday’s slap on the FOMC minutes and subsequent rally straight back was a bit of signal that there are some buyers about.

          2. Got through that resistance ok, DAX back to opening, shows how weak we are comparatively.
            No rush, but another short waiting.

          4. Didn’t get through 10 now having a go at 00. Have had a limit sell at 10, so close…. moved a stop for the lot in at 90. Diff trade, stop at break even.

    2. re chart/DOW, just get up a 4 hour and draw two nearly parallel lines down one joining lows, one joining highs, since late April. That’s the channel I keep on about and all you really need to know short term.

      1. OK, done that but on my phone! So it seems bottom of channel around now is 400 ish, top is 600 ish? If that is correct and I’m bullish then downside is 60 points, upside 140 odd points? Or have my Silk Cut been fiddled with and I’m looking at the wrong thing?

  11. Re imminent DOW opening, no idea really, but maybe similar to yesterday, doesn’t like to gap much these days and then tries to get unch pretty quick, so very early downside maybe limited. I’ll take the rest of the short out before if I can get 80’s again I think.
    The only thing in the back of my mind is that obviously everyone can see these patterns.
    If, for whatever reason, I was red braces and looking to dump a quantity I’d let it go when most buyers would be about. Especially if everyone’s expecting -60 open to go unch as usual, wtf do they do if someone says ‘Ok, have some of this’ and 10 minutes later it’s -150?
    No reason to think it will happen today though.

    1. On the other side of the coin, if I was red braces and looking to change some of my low yielding cash into equities I’d wait until they were smashing it and pick it up on the way down, until they didn’t smash it and I was panicking to get in – swiftly +150. I’m not saying I’m right and you are wrong but if I was Mr. Red Braces then I’d rather be buying stuff at 6100/17500 than having to pay 6400/18000 or whatever.

      1. Oh sure, just wondering how much stoploss hitting it through the lows would inspire.
        Just a bear fantasy.

        1. Yep, understand and to be fair looks like currently you are correct! Anyway, good short from 10-ish, I was watching at that stage and try as it might just couldn’t get through, I should have taken the blue at 08 or something when it was offered and reloaded now but never mind.

  12. Stopped at 50 on the difference trade, it was fun whilst it lasted and, once again, should have taken the blue when it was offered. That said, look to replace if I see 30.

  14. Looks like the attempt for unchanged is underway, doesn’t want to have another look at 450 though, needs to get some momentum.

          1. Thanks TMPF!! I m done for the day with those 12 pts !! Time to pump up in gym !! You guys have a good time !!

  17. Pretty damn good arrows by Nick again, not quite got the timing but got the momentum 100%.
    No buyers on the FTSE whatsoever.

  18. Hmm, looks a bit messy. Just bought some difference at 11300 and FTSE at 56. Looking for a bit of a bounce (dead cat or otherwise) will let diff go at 30. Ftse is part of the master plan.

      1. I wonder which way we’ll jump into our close, short covering rally or long dumping?

        1. Short covering – They can have my expensive ftse back at 92-ish,
          Long dumping – I’ll have a re-invest at 50 and down.

          1. Yeah, I’ve lost the plot a bit since that 52 faux pas.
            DOW making me nervous, you’ll get your 50 before your 92 I reckon.

          1. Looks like you’re on rabid duty today my friend, be calm, there’s always etc etc
            fwiw I’ve decided on a short MHH.

          2. DOW bang on the channel line now, won’t make a lot of difference short term.
            But took half out at 60, running rest to bell, 40, or b/e 77.

          3. and out for +23 just after the bell, that bit of short covering wasn’t going to last.
            Not looking very clever is it, but recent history says that’s the time to buy..
            Good luck all, Friday fun coming up!

  21. Situation report – nicked less than I could have and still have an out of the money long. Left the difference, saw it down to mid 60’s and watching it up. Not getting rabid. Am looking for some FTSE at 50.
    So, catching knives!

  22. Tmfp, I know you are out there! In terms of rabidity I’ve not got too excited but I have pulled sell limits at 90, in for the run, next stop 40 with a big figure of your choice!! Cheers

    1. Lol, hiya chippy, fortune favoured the brave I see.
      Certainly seem to have repelled boarders for the time being, good bounce off the trendline or what? Nicely put together rally too, only 100 points but not some silly last 10 minutes stuff.
      If the Asians play ball overnight, could well have a look at 6120 again in the morning, maybe even the magic 40, who knows?
      See ya there.

  23. Hi Guys. I couldn’t get into this today…..took some losses first thing a -48 and a -61……….then closed two trades in profit…one for + half a point…and I’ve just closed my 82 long I’ve been sat on all day because I had fomo of it going up for a daily record of +6pts…..not on good form at all today….good night all.

    1. Good night,I’ve got the opposite,short the Dow at the 61.8 retrace and thinking I should have closed it at a small loss lol.

      1. ..and I’ve done b*gger all for nearly 5 hours, after a day of 14 shorts and 4 longs…
        I just feel more at home when it’s going down lol.
        Cheers WSF.

      1. Morning tmfp…..I just woke up…..had a look on my phone….my 90 long from yesterday was up to 110…..so this time I took the +20 at 6110…….better start to the day……even if it does go up further at least I banked some blue……thanks for your advice …..going back to sleep now with less risk….catch up with you later…..

  24. Don’t forget blue ink guys, it’s not really blue till you press that button 😉

    1. Morning anstel, just dumping my opening long now and shorting at 46, good luck today 🙂

        1. Just watching now for a while, what indicators you using today?
          I see you gave up on watching rsi the other day, just track it for a while and paper trade entries, been working well for me recently.

          1. I watched the RSI then and just by feeling the pressure and watching a Dax and closed Dow chart all on 3 min.my Ftse is on 3 min at the moment too….

          2. Well, as you know I’d say bin the DOW at this time of day (about as much use as a chocolate teapot) and get a 1 min and 3min ftse up and think about entry when they correlate o/b or o/s.
            Continually do mental fibs, i.e. 6110 to 46 = 36/50% = 28ish possible long entry, if rsi agrees.
            And don’t bull at a gate, plenty of time, plenty of trades.

      1. Because it was a crap fomo entry with no technical justification that’s why, see you on today’s page. No more nagging. 😉

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