FTSE 100 Support 6846 6836 6804 6797 6777 6744
FTSE 100 Resistance 6861 6864 6880 6921 6950

Good morning. A shame that the FTSE 100 didn’t fall from the 6860 level, instead it tested the 2 hour coral at 6885 and fell from there. However, the bulls refused to give in and staunchly defended the 6810 level, including a test at the bell to take it up to 6840 where it remained overnight.

The 2 hour chart is actually bullish now, so if we presume that 6810 is the low for the moment, we could be looking at a decent long entry around 6836 for a run back to 6950, maybe more. Of course, we have Jackson Hole this week (Thursday) when Yellen speaks and may give more clues on interest rates following a hawkish Fed yesterday.

US & Asia Overnight from Bloomberg

• New Zealand’s central bank sees no need for rapid rate cuts
• Fed policy in focus before Yellen speaks at Jackson Hole

Asian energy shares dropped with oil, weighed down by the prospect of increased crude supplies. The dollar weakened versus most peers as traders remained less than convinced that the U.S. will raise interest rates this year.

The MSCI Asia Pacific Energy Index fell for a fourth day, its longest losing streak in three months, as oil extended Monday’s retreat from a seven-week high. The Bloomberg Dollar Spot Index snapped its biggest two-day advance in a month ahead of a Friday speech by Federal Reserve Chair Janet Yellen that may shed light on the outlook for U.S. borrowing costs. New Zealand’s currency strengthened after its central bank said the pace of interest-rate cuts in the nation will not be rapid.

Global markets have been dominated over the past week by speculation about the timing of the Federal Reserve’s next interest-rate increase. Comments from regional Fed presidents including William Dudley and John Williams suggested U.S. borrowing costs may rise as early as next month, a more hawkish tone than was evident in the minutes of the last policy meeting, and traders will be seeking further guidance when Yellen speaks at an annual symposium in Jackson Hole, Wyoming. Futures prices indicate about a 51 percent chance the central bank will increase rates this year.

“With investors waiting for Yellen, it’s unlikely that we’ll see a strong direction in the stock market,” said Toshihiko Matsuno, a senior strategist with SMBC Friend Securities Co. in Tokyo. Still, “oil, which had been rebounding, has started to correct again,” dragging down commodity-related shares, he said.

Allianz SE’s Mohamed El-Erian said that Fed officials need to consider the costs of keeping interest rates low, warning that it could create distortions in financial markets, punishing savers and encouraging trades by bond investors looking for better yields.

Stocks

A gauge of energy stocks on the MSCI Asia Pacific Index was down 0.8 percent as of 11:10 a.m. Tokyo time, the biggest loss among 10 industry groups. Cnooc Ltd., China’s biggest offshore oil and gas producer, and Inpex Corp., Japan’s biggest energy explorer, dropped by about 2 percent.

Japan’s Topix index fell for the first time in three days, while Australia’s S&P/ASX 200 Index advanced to a three-week high. Hong Kong’s Hang Seng Index declined 0.3 percent and the Shanghai Composite Index gained 0.3 percent.

Futures on the S&P 500 Index declined less than 0.1 percent, while those on the FTSE 100 Index added 0.5 percent.

Currencies

The Bloomberg Dollar Spot Index lost 0.1 percent, after jumping 0.6 percent over the last two days. South Korea’s won strengthened 0.8 percent versus the greenback, rebounding from its weakest close of the month.

“The U.S. dollar may have pulled back on hopes that the Jackson Hole symposium may focus on lower-for-longer type of policy rather than the need to imminently tighten policy,” said Vishnu Varathan, a senior economist at Mizuho Bank Ltd. in Singapore. “But in the run-up to Jackson Hole we do expect markets to be hyper-sensitive on U.S. policy hints, real or perceived, and so the U.S. dollar and U.S. yields will be volatile.”The New Zealand dollar surged as much as 0.8 percent after Reserve Bank of New Zealand Governor Graeme Wheeler said that while he intends to lower interest rates further to revive inflation, a series of rapid cuts is not justified.

Commodities

West Texas Intermediate crude oil for October delivery was at $46.69 a barrel on the New York Mercantile Exchange, down 72 cents. The September contract expired Monday after dropping $1.47 to close at $47.05, snapping a seven-day winning streak.

Oil fell Tuesday as the market awaits comment from the Nigerian government on a proposal by militants to end hostilities, a development that could boost the nation’s oil output. The cease-fire declared by Niger Delta Avengers should be viewed with caution, according to analysts from Commerzbank AG and Global Risk Management. Iraq, OPEC’s second-biggest producer, is in the process of boosting crude exports by about 5 percent after an agreement to resume shipments from three oil fields in Kirkuk. [Bloomberg]

FTSE 100 Outlook and Prediction

The usual pattern recently has been a bullish Monday followed by a bearish Tuesday. However, for today, with the 6810 level holding well at the close (often the so called “smart money” enters at the close of the day and the “dumb money” at the start of the day) I think we could break that trend and see a rise today, back towards 6900. To that end the 2 hour chart is actually bullish again using my indicators, flagging a long entry at 6836.

We also have the green 30min coral (trend indicator) for support also at 6836. If this does hold and the long starts to go in our favour there are a few resistance levels to note. Namely, the 200ema at 6861 and the coral on the 2 hour at 6864 (we dropped off this coral line at 6885 yesterday so shouldn’t be quite as strong resistance today), then 6880 for R1. Ultimately I’d like a rise to 6921 or higher.

On the flip side, if the bears break 6836, then we will most likely break down through 6810 today, though we do have the Bianca channels at 6804 and 6797. Below that 6750 is a likely area of support, and also if 6800 breaks where its likely to head too pretty easily. So, worth flipping to short if the 6836 long doesn’t work (i.e. if the stop is about to get hit or does then just flip to short)