FTSE 100 resistance 7088 7150 | support 7054 | Asia declines | Sterling weakens

FTSE 100 Support 7075 7054 7050 7043 7012
FTSE 100 Resistance 7088 7124 7140 7141 7154

Good morning. Well we got the dip and rise yesterday as expected, with the low just missing the bottom of the daily Bianca channel by a whisker. The bounce from 7020 lasted for most of the day and saw an overnight high just shy of the recent high at 7124, before Samsung woes dragged Asia down, and the futures with it. Sterling continues to weaken, 123 to the dollar as I write this. Its looking like traders are more certain of a December rate rise by the Fed as well. Gold continues to hold above the 1250 level for the moment, while yesterday saw a 3% rise in oil – also helming fuel the FTSE 100 rise. We will we get the usual pattern of Bull Monday, Bear Tuesday this week?

US & Asia Overnight from Bloomberg

The dollar climbed versus all its major peers as bonds dropped after investors boosted expectations for a Federal Reserve interest-rate increase this year. Asian stocks reversed gains as Samsung Electronics Co. and Chinese developers tumbled.

The MSCI Asia Pacific Index dropped by the most this month, led by technology shares after Samsung told retail partners to stop sales and exchanges of its Galaxy Note 7 smartphone. The greenback climbed at least 0.5 percent against currencies from New Zealand to South Korea and Taiwan as 10-year Treasury yields added four basis points following Monday¹s market holiday. U.S. crude was near its highest price in 15 months.

Stocks unwound initial gains as investor nervousness remains amid concern over the looming U.S. presidential election, the U.K.¹s planned departure from the European Union and the potential for a U.S. interest-rate increase. The Bloomberg Dollar Spot Index is climbing for the sixth time in seven trading sessions as expectations build that the Fed will tighten policy in December for the first time since the same period in 2015.

U.S. dollar gains are ³entirely linked to the fact that the market has been upwardly rerating expectations of a December rate hike,² said Sue Trinh, head of Asia foreign-exchange strategy for Royal Bank of Canada in Hong Kong. ³Three weeks ago, the implied probability of a December hike discounted by fed funds futures was under 50 percent, today it is close to 70 percent.²

Crude held most of its biggest one-day gain since Sept. 28 as ministers from some of the world¹s largest oil-producing nations gather in Turkey, after provisionally agreeing to freeze output last month. Russia indicated it¹s willing to join OPEC efforts to stabilize the market, while the Saudi energy minister said he¹s ³optimistic.²

³The fact that Russia has shown willingness to cooperate with OPEC is a tailwind for oil prices going forward,² said Toshihiko Matsuno, a senior strategist at SMBC Friend Securities Co. in Tokyo. ³In the short term, it¹s positive for oil and mining shares, and it¹s also improved market sentiment.²

Stocks

The dollar-denominated MSCI Asia Pacific Index retreated 0.5 percent by 1:10 p.m. Tokyo time, as technology shares had the biggest declines as a group. The Kospi index slipped 1.1 percent in Seoul with Samsung tumbling as much as 7.3 percent.

³Within Asia, Samsung¹s problems are a major issue that¹s effecting electronic partsmaker shares,² said Mitsushige Akino, an executive officer at Ichiyoshi Investment Management Co. ³The decline in Korean stocks is mostly a reflection of that.²

The industry¹s fortunes were split between suppliers of Samsung and Apple Inc.¹s iPhone. In Taiwan, shares of Radiant Opto-Electronics Corp., a Samsung supplier, plunged as much as 8.4 percent while HannsTouch Solution Inc. lost 9.9 percent. Among makers of iPhone components, Alps Electric Co. and TDK Corp. advanced in Tokyo, and Japan Display Inc. climbed 4.1 percent.
In Hong Kong, the Hang Seng Index and the Hang Seng China Enterprises Index each dropped more than 1 percent.

The Topix gained 0.5 percent from Friday levels, rising for the fifth time in six days, while Australia¹s S&P/ASX 200 Index increased 0.1 percent. The Shanghai Composite Index rose 0.4 percent, adding to the 1.5 percent surge it posted Monday when shares resumed trading in China after a week-long break.

Global trading got off to a rocky start in October amid speculation that the European Central Bank will start tapering stimulus and as hawkish comments from Fed officials boosted bets on a rate increase in 2016. Minutes from the U.S. central bank¹s September meeting will be released on Wednesday, and data on retail sales, producer prices and consumer sentiment are due Friday. Investors are also seeking clues as to the health of corporate America, with Alcoa Inc. kicking off the next earnings season on Tuesday.Futures on the S&P 500 retreated 0.2 percent after the underlying benchmark climbed 0.5 percent on Monday.

Currencies

The yen, which typically moves at odds with Japanese stocks, dropped 0.3 percent to 103.86 per dollar, weakening for the 10th time in 11 sessions.

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, rose 0.2 percent. The kiwi tumbled 1 percent while the Aussie dollar and the South Korean won each weakened more than 0.7 percent. The Philippine peso slid 0.3 percent and touched a seven-year low of 48.51 per U.S. dollar.

The offshore yuan also weakened, slipping for an eighth straight day in its longest retreat since 2014. The currency was down 0.1 percent to 6.7208 a dollar in Hong Kong, touching its weakest level since Jan. 7. The onshore-traded yuan declined 0.1 percent and hit 6.7154 per dollar, its lowest since September 2010.

Mexico’s peso held gains near its strongest level in a month after surging almost 2 percent last session on speculation Republican Party candidate Donald Trump’s performance in the second U.S. presidential debate wasn¹t strong enough to boost his chances against Democratic nominee Hillary Clinton.

“With Secretary Clinton taking the upper hand at the debate, negative factors have been scaled back a little for the markets,” Matsuno at SMBC Friend Securities said.

Bonds

Treasury notes due in a decade yielded 1.76 percent as trading resumed following the Columbus Day bond-market holiday.
The decline in Treasuries is being driven by the willingness of Saudi Arabia and Russia to cooperate on an oil output deal, said John Gorman, head of non-yen rates trading for Asia and the Pacific at Nomura Holdings Inc. in Tokyo.

Asian government debt followed suit, with yields on 10-year Australian bonds up six basis points, or 0.06 percentage point, to 2.24 percent. Yields on similar maturity notes in Japan climbed by more than one basis point and those in South Korea climbed five basis points.

Commodities

West Texas Intermediate crude slipped 0.2 percent to $51.26 a barrel after jumping 3.1 percent last session to its highest closing price since July 2015. Brent traded at $53.05 per barrel.

Oil has gained almost 15 percent since the Organization of Petroleum Exporting Countries provisionally agreed last month to cut production for the first time in eight years. The group¹s members meet this week in Istanbul for talks on implementing the deal and Saudi Arabian Energy Minister Khalid Al-Falih said it¹s not unthinkable prices will rise to $60 a barrel by the end of this year.

Gold for immediate delivery was down 0.1 percent to $1,258.69 an ounce, heading for its ninth decline in 11 trading sessions. [Bloomberg]

FTSE 100 Outlook and Prediction

FTSE 100 Prediction
FTSE 100 Prediction

For today I am going to go with my gut feel and follow the bull Monday, bear Tuesday pattern, with a short from the daily pivot area at 7088. We also have the 25ema on the 30min here, after an overnight cross to bearishness on the moving averages. Its also the 100 Hull MA on the 2 hour which normally would be support, but has been broken through by the bears after that fall overnight off the back of the weaker Asian session. There is still concern over the looming U.S. presidential election, the U.K.’s planned departure from the European Union and the potential for a U.S. interest-rate increase, all weighing on traders minds. Yet some forecasters are still talking about 7400 coming soon?

Anyway, for today I think a decline down towards the bottom of the 10 day Bianca channel at 7043, and possibly the 20 day at 6993 is likely. If 6993 breaks then 6970 and 6900 are the next supports of note, but the bears will probably need a bit of fear in the markets to break the 7000 level with conviction. Which may come from somewhere unexpected. If oil rises again today then of course that will help the FTSE again, and we may see the bulls manage to break through that 7088 level and push towards the 7130 and 7150 levels. For now, I am watching 7088 as a decent short entry for a bit of FTSE 100 weakness today.

90 Comments

  2. well that plans blown Nick, looks like we are going up for rest of the day. by the time they trigger article 50 sterling will be worthless at in current rate of deprecation.

      1. no stopping the ftse is a bull on its own mission, 7400 is looking a good bet if sterling falls to 1.14

  4. Hello guys.
    Took out that small long at 20 and sitting on hands for a pullback. I think we have the room for a new high this week, maybe 250.
    When the reversal does come I think it will be brutal, but for the time being selling is virtually non existent and the disappearing £ will underpin the FTSE as a hedge if nothing else.
    BTFD with guaranteed stops.

    1. Fully agree with you there tmfp, when the selloff comes in to play it will be very nasty. As you said ftse is being underpinned by a weak sterling but even that can only last so long, but for now your right buy the dips is the only method on the ftse.

    2. I just re-read Nick’s analysis
      “but the bears will probably need a bit of fear in the markets to break the 7000 level with conviction. Which may come from somewhere unexpected.”
      +1

      Although we always trade with the by definition chance of waking up to a “Black Swan”, (and anyone who has traded on the expectation of one is now well broke) what would you guys see in the world at the current time as the source of one?

      I’ll start with the old favourite
      War.

      3. What else we got…?
        The US election.
        What happens if Hilary has a major health problem?
        Initial sell off?
        It probably would increase the chances of a Democrat victory, removing the dynastic negative she represents.
        Democrat victory = more of the same, neutral/bull for equities.
        What about if Trump starts improving his ratings (somehow)?

  6. FFS we are due at least 100pt drop…come on!

    Thing is if you amortize (maybe wrong word) the new relative worth of the FTSE given the new value of the £ it’s mostly likely at about the 6800 mark or less…if that makes sense.

  7. Well FTSE tested 7120, are we in for a down leg now..
    Looking at the rise from 7000 to 7120, the pound/dollar lost 10% odd and oil over same period is up 10% odd… With these helping is only by a ratio of 1:10 ?

  8. I took a short from 7120. I think it will drop a fair chunk. I also have a hedging short gbp/jpy forex trade which I will likely close if ftse hits 7080 ish.

  11. Continued longing since the 104 at 94 and 88, the only question for me is when we break 120, before or after the DOW open.

      1. Replaced a bit @ 10, should we get a usual bit of pre DOW weakness then a bit more at 00, would be surprised to see that go.

        1. Replaced more on the first visit to 90, but the DOW disappointed, was expecting green straight away from them.
          Second fail at 7100 was dump time and glad I did.
          DOW should get support around 200 and FTSE around 60 imo.

    2. I wouldn’t be interested in a short till around 50/60 if it gets there quickly, for maybe an oversold correction back to the teens.
      There is no selling.
      All my savings are now out of Sterling and into Euros, you should have seen the Spanish Bank manager’s face when I turned up on my bike to authorise a ££££ transfer. And then asked what he knows about Bitcoin. 🙂

      2. Not sure the £ is going to fall much further. Can see it bouncing back towards $1.30 and then who knows when article 50 triggered. As far as FTSE my opinion is its bouncing along the top before a considerable pull back. Can also see Dow below 18k very soon possibly this evening.

      3. Hi tmfp.
        so what is the intetest rate on savings in the spanish account if you dont mind me asking? I was thinking of putting some money into icici indian bank…

        1. Effectively Zero Mr. B.
          I am in the process of moving there, so it was as much a convenience move as well as a trading one, although I’ve been hedging my stg capital since 1.28 in expectation of parity next year. Still got £ pensions coming in to maintain a place here too, trying to strike a not all eggs in one basket balance..

          1. Ok I see, thanks 4 reply. If I was to move some money into the indian icici bank in order to gain from their interest rate, its then called ‘hot money’ apparently…but, no one seems to know why its called this?…GL with your trades

  13. Hello All,

    Its been a while, just thought I will say a hello. I have been trading in the background but very little due to work schedule. I have two position on Dax from yesterday, Long average 534. With a stop at 580 and target is 710 initially and 800 hopefully.

    I’m seeing the Dax going back to 11k but its been tricky to run positions longer term in the past few months.

    1. Good to have you back here. I thought you’d disappeared. Hope you’ll drop your advice here now and then 🙂 We appreciate it so much.

    2. Hi RJ, I’ve been away too, seems strange being back in the 7000’s, last big trade I did was in the 5’s 🙂

      1. Hi tmfp,

        Was it a long vacation ? yes it feels strange to be in 7000s but i think we will be in 7000s for sometime. Still there’s time for a Big Short 🙂

        1. It was a Smell the Roses Break Before You Get Totally Senile Break RJ, resting on my Brexit short laurels.
          There’s always time for The Big Short, the tricky bit is the timing…
          😉

  18. Afternoon chaps, long time no see! I’ve not traded at all since brexit, as I said at the time I nicked circa a years money then gave half of it back, so retired to the background and have been concentrating on ‘real life’! I must admit I’ve been seriously tempted to get back but reckon I’d have given yet more back!
    As with all my thoughts, take the following with a pinch of salt!! I still think that the year end will be circa 6500. Simply, by what ever means I reckon gbp will rally off these levels and much like oil in the early part of the year, currencies will fall out of fashion as method by which to price ftse. If I was to do anything now it would be to build a little position in gold.
    Anyway, good luck all, if not before I’ll be back in the new year.

    1. Hiya chippy, yeah I had the summer off too.
      Beg to agree to differ, big £ bear here. Good luck matey.

      1. Don’t know where I’m supposed to be but every time I take the trade today it goes to the opposite direction.

  21. Long gbpusd at 1250,
    Dow short closed for +130points, may add in again with tight stop.

    In short so heavy on FTSE it hurts! Target 6800

      1. Oh yes, I can’t be saying BTFD and when it pulls back then not do it, can I?
        I’m no bull in the great scheme of things, but I think there’s more upside potential than down at this point in time.
        DOW has gone a bit further than expected, but hasn’t broken anything and neither have we.

  24. My word the pound is being hammered!!!

    Previous gbp trade stopped out (luckily)

    New long added at12125. Stop at 12096.

    When thus catches it’d gonna do a big rise.

        1. Hiya, anstel, how you doing?
          With the low out of hours volume I’d guess any rally will get dumped into tonight, until the DOW sorts itself out. I have 30 various things on my Watchlist, 28 are red.
          Bitcoin rising to the occasion though 🙂

          1. Hiya tmfp….I’m doing ok thanks ive learnt to be happy trading smaller size lots …..I still have fomo when deciding whether to take the blue or not though but I’m better than I was….sometimes I still get a kind of mental block…a sort of stubbornness to be right if you like…..but quite often now I can just go with the flow and be totally flexible ….my fear of shorts has reduced a lot and I have identified an area that has caused me to not take profits when I had them….there’s a lot of subconscious things in our minds that cause us to not act in our best Interests financially…..but our hidden subconscious motives get fulfilled….Ed Seykota said …..”everyone gets what they want from the market” I understand that clearly now…..I’m totally convinced that it’s all in the traders mindset …..I think that’s why the failure rate is in the high 90% because with all the courses and books and videos that people attend ,read, and watch they still find it extremely difficult to be consistant….so it’s not what they teach you it’s something else……If I could go back three years and give my self two pieces of advice they would be to not get overconfident and trade smaller size…..and identify any area of your life that you may need to address and not to use trading as a distraction from it….It’s great to see you back on here tmfp……and once again thanks for all the advice you passed on to us all……very best of luck….catch you tomorrow :0)

      2. They can’t really do that Si, with the big increase in the price of imports, a dose of inflation on top of a crippled economy and a worthless currency = Banana Republic.
        What NHS?

  25. Closed FTSE short, too unpredictable. I’m short DOW from 18339, I really never know what to do with blue numbers; I’m only good at holding reds!

        1. No way can this just get ramped up again, surely… Has happened every night that there’s been a good fall.

  26. Not sure how this going to go down (or up) in Asia overnight, so took another third of the long out at 87.
    If they’re not too bearish, could see another go at getting/staying over 7100 tmrw morning, or maybe a pullback to test 60 first.
    Shaping up to be an interesting week.
    Night.

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