Flat ahead of the divi | Asia climbs | Chinese inflation | FTSE 100 6855 resistance

FTSE 100 Support 6814 6806 6782 6741 6669
FTSE 100 Resistance 6822 6830 6851 6854 6880

Good morning. We got a nice drop from just above our 6820 short yesterday though it stopped just short of the pivot so a good move closing at 6785. The bulls fought back from there and we are back above 6800 now, with more and more mentions popping up about tomorrows large 36 point dividend. IG even flash a warning when you log in today! This will certainly help keep the market up for the moment and I imagine a rise tomorrow late afternoon as well. China news overnight on inflation indicating a bit of stability.

Interesting posts from some of the Elliot wave count people yesterday that are expecting just a bit higher on the S&P – around 2195/2200 before a leg down. Would tie in with the top of the Raffs on the daily which also have those levels today. Keep an eye on that. Both the FTSE Raffs are 6880 as well, which would tie in with that S&P level.

US & Asia Overnight from Bloomberg

Asian shares climbed to a one-year high as Chinese inflation data added to signs of stabilization in the world’s second-largest economy. Oil retreated and the British pound fell for a fifth day.

The MSCI Asia Pacific Index advanced for a fourth day, led by gains in energy and raw-materials producers. U.S. crude traded below $43 a barrel, after jumping 2.9 percent in the last session as OPEC predicted the current bear market in the commodity would be short-lived. Sterling slipped to a four-week low after the Bank of England started its expanded monetary easing program this week. Taiwan’s dollar was the biggest gainer among 16 major currencies after the island’s stock inflows exceeded $1 billion for this month.

Global equities ended the last session at the highest level in almost a year, having been buoyed by U.S. economic data that are exceeding estimates by the most since 2014. China’s factory-gate deflation eased for the seventh straight month in July, signaling improving conditions for manufacturers in an economy that expanded last year at the slowest pace in more than two decades.

“The health of the U.S. economy continues to support the market,” said Yutaka Miura, senior technical analyst at Mizuho Securities Co. in Tokyo. “Many Asian markets are reaching new highs, and behind that is the strength of the U.S. economy.”

India’s central bank is forecast to leave interest rates unchanged when Governor Raghuram Rajan conducts the final policy review of his term on Tuesday, while Germany and the U.K. have trade data due. In Brazil, the Senate will vote on opening an impeachment trial against President Dilma Rousseff.

Stocks

The MSCI Asia Pacific Index added 0.4 percent as of 1:24 p.m. Tokyo time, after climbing 2.4 percent over the last three sessions. Japan’s Topix index rose 0.6 percent, while Hong Kong’s Hang Seng Index retreated 0.2 percent from its highest close since November. Financial markets in Singapore were shut for a holiday.

Australia & New Zealand Banking Group Ltd. shares jumped as much as 3.7 percent to a seven-month high after the lender said it had boosted capital and reduced low-returning assets. Office-equipment maker Brother Industries Ltd. soared as much as 22 percent — the most in 18 years — and Nissin Foods Holdings Co. climbed more than 5 percent in Tokyo after the companies reported earnings.

Futures on the S&P 500 Index were little changed, after the gauge slipped 0.1 percent from a record on Monday. Contracts on the U.K.’s FTSE 100 Index were up 0.1 percent.

Commodities

Crude oil slipped 0.9 percent to $42.62 a barrel in New York. The Organization of Petroleum Exporting Countries said Monday the group will hold informal talks next month and that members are in “constant deliberations” over stabilizing a market that they expect will gain ground in the latter part of 2016.

“Nobody seriously thinks that OPEC will come up with anything that will tighten supply,” said Michael McCarthy, chief strategist at CMC Markets in Sydney. “Having bounced off the support near $40, and without any further supply coming online, we’re moving toward the middle of the trading range of about $44 to $45.”

Copper declined 0.2 percent in London, while nickel fell 0.1 percent. Gold was little changed near $1,335 an ounce.

Currencies

The pound sank 0.3 percent versus the dollar, contributing to a five-day loss of 2.7 percent. As well as cutting interest rates for the first time since 2009, the Bank of England on Aug. 4 exceeded economists’ expectations with an announcement that it would increase its gilt-purchase program by 60 billion pounds ($78 billion) to 435 billion pounds, starting this week.

“We could see some short-term weakness in the pound,” said Janu Chan, a senior economist at St. George Bank Ltd. in Sydney. “It was an extensive stimulus program that the BOE announced. The economy has been hit in the short-term, and could face a minor recession.”

The yen rose 0.1 percent to 102.35 per dollar after sinking 1.2 percent over the last two sessions. Taiwan’s dollar gained as much as 0.4 percent to its strongest level in a year. Global funds boosted their holdings of the island’s shares by $196 million on Monday, taking net inflows for this month to $1.12 billion, according to data compiled by Bloomberg.

Bonds

The yield on Chinese sovereign bonds due in a decade fell one basis point to 2.74 percent, the lowest since January. Demand for the relative safety of government debt has been spurred by a rising number of company defaults, with a Chinese shipbuilder becoming the latest to renege this week. At least 18 domestic yuan bonds have now defaulted this year, exceeding the seven for all of 2015.

The yield on U.S. Treasuries due in a decade declined by one basis point to 1.58 percent, having been little changed in the last session. It jumped nine basis points on Friday, when better-than-expected U.S. jobs data spurred speculation the Federal Reserve will raise interest rates this year. [Bloomberg]

FTSE 100 Outlook and Prediction

FTSE 100 Prediction
FTSE 100 Prediction

I am thinking we will see a similar pattern to yesterday with an initial rise stalling at the 20 day Bianca area at 6822, with a drop back to the pivot then a climb to the 10 day Bianca at 6850. I have put a long at 6750 in the trade plan in case we drop down to the 2 hour coral support area, though I am not sure the bears will be that strong today. You never know though!

We have the top of both the Raff channels at 6880 so I am wondering if this is a good place to swing some shorts from depending on if/when we get there and the dividend to factor in as well. For the moment its all still with the bulls, as you saw with their fight back yesterday, so if the pivot holds as support at 6806 then that is worth a long there. They will certainly be keen to keep it over the 6800 level, whilst the bears are probably just keeping their powder dry for the moment.

46 Comments

      1. Morning Jim QE and sterling going under 1.30 not helping, also noted that retail sales surged in July so good news is good & bad news is great.

  3. In long this morning at 6713. Will add in after 9:30 data. I have A few shorts to cover so I don’t get want to get stung by divs tomorrow. Anyone trading the dividend as in buying in to take the payout. ? Not sure on a good strategy as not tried it.

  4. Morning chaps…..glad to see the world economy is doing so well and the market is going up strongly……time to BTFATH…….lol :0)

      2. If you mean me inoodle I’m trading as normal till the sun comes out…..just taken a trade on cable as I think Ftse is stuck around the 30 mark at moment,,,,

        1. Hey anstel, yeah meant you 🙂
          did you go long or short cable ? ftse really stuck… guess it might go quite quickly if it breaks..

  7. I’m short on FTSE 6800, sitting on my hands, will not add to position..
    Uptrend prevails 6780 support..
    Regarding the big Dividend, if you short, just go long, same amount before the closing bell…

  8. Heya guys new to the site, been trading on and off for a while (currently demo-ing a strategy with IG) I’ve been following this site for a while tho and it’s definitely a help, just a quick question tho, what is the best way to trade around the dividend tomorrow? Is it just a case of securing/hedging current positions or can you actually trade it itself?. If so what’s the best strategy around it. It’s not something I’ve done before I usually stay out on divi days. Cheers guys.

    1. Hey karleeto
      My understanding is to go long sometime after 3:30 bst. then get out before the close at 4:30…
      Never seen such a large dividend though, so i guess it could have an effect from much earlier tmrw…

  11. Still in long from 6713…going to leave it til post 16:30 tomorrow. Try and collect some diva from it.

  15. If we have any kind of big drop on the FTSE between now and tomorrow’s close, then I’ll share something with you all. #conspiracy

  16. I know the markets are manipulated but don’t know to what extent? I love a good conspiracy theory.

    P.s I have a short at 6345 but is only small. I keep it there as I am convinced we will see 5800 again ( will cost me more in rollovers must probably) the economy is knackered it’s time until the Bulls become bears – Trump may do that for us?

  17. That super strong dax nearly killed me – I didn’t expect it to sit above 90 on 5min rsi (14) or to go to 94 rsi… dax was overbought on all timescales up to 1hr.
    Lesson learned I guess, but I didn’t hear any news to back up the move and the other markets (ftse,dow, usdjpy) didn’t quite mirror the move, so I sold and kept selling… then after market it finally came off and I made some cash.
    My RRR was heavily inverted in what i made vs how much i was offside – not ideal in any sense.
    My guess is that that the light volume was used as a short squeeze – or I missed the memo telling me why it was so strong!

    1. the reason given for the dax rally was that it has gone 20% from its January lows entering it into a bull market.

  18. I’m also slightly stumped by all of this movement in the markets of late, I’m not one for paying too much attention to the news as it does not affect my strategy however I’m getting intrigued now. My main indicator that I use is the stochastic, it’s relatively accurate and I’ve had good success with it so far however looking at the monthly chart the stochastic level that we are at as of now has never been reached before and is massively overbought (since 1998 ref IG stochastic) and it still looks like there is room to move. does make me wonder what is driving these markets especially in this current climate (?)

    1. You are right KArleeto My take is that big boys have got the trigger and they are probably waiting for more and more people to either take hit or stopped lose… coming back to drop I do think once it starts tumbling there is long way b4 bottom !! like last year ! but this is what makes it interesting and different !

  19. love the way the dax has now come off another 20 points… these super rallies always seem to end in a prolonged aftermarket fall / profit taking / unwind of squeeze

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