FTSE 100 support 6970 6920 | Resistance 7045 7070 | Asia declines | Bear time!

FTSE 100 Support 7002 6990 6970 6920
FTSE 100 Resistance 7045 7073 7089 7178

Good morning. Apart from an initial foray up to 7076 at the opening bell the bulls were not able to push on yesterday and indeed its starting to look like the bears might be finally wrestling control back. Sterling strengthened against the dollar during the day, though a slightly muted effect on the FTSE, but saw a slow steady decline down to 6990 overnight. As mentioned in yesterday’s missive, 6990 is fairly key – the bears need to break that to push lower, so the bulls will need to be quick out the blocks this morning to “rescue” their charge. The 2 hour chart is still bearish with resistance at 7073. Fed minutes last night would indicate that a December rate rise is still on their minds.

US & Asia Overnight from Bloomberg

  • China outbound shipments fall for first time in seven months
  • Fed minutes show decision to hold in September a close call

Asian shares slumped with U.S. stock futures and the yen reversed a decline against the dollar as an unexpected drop in Chinese exports spurred concern about the outlook for the global economy.

The MSCI Asia Pacific Index declined 0.6 percent, with shares in Hong Kong tumbling 1.1 percent, while futures on the S&P 500 Index lost 0.6 percent as of 12:28 p.m. in Hong Kong. Treasuries rose the most in two weeks amid demand for the safest assets. Thailand’s benchmark equity index headed for its lowest level since May. The yen climbed 0.4 percent against the U.S. currency, while the yuan weakened to a six-year low. Crude oil continued to decline, sliding 0.8 percent to below $50 a barrel.

Volatility is climbing as investors grapple with fresh evidence of a deepening slowdown in China, increasing bets on a U.S. interest-rate hike and uncertainty spurred by Britain’s vote to leave the European Union. Minutes of the U.S. central bank’s last meeting released Wednesday reinforced the case for tighter monetary policy before the end of the year.

“Poor export numbers spark concern about the rest of the world’s economic outlook,” said Andrew Clarke, Hong Kong-based director of trading at Mirabaud Asia Ltd. “Sentiment is already pretty pessimistic, with Brexit and the sterling, the yuan looking vulnerable, the property bubble in China, looming cash calls from mainland banks and of course, who becomes the next U.S. president.”

Currencies

The Bloomberg Dollar Spot index erased gains on the China trade report and was little changed in afternoon trading in Asia. The gauge had advanced to a seven-month high after the Fed minutes showed the decision to keep rates on hold was a close call. Odds on an increase in U.S. borrowing costs by the end of the year remain around 68 percent, according to Fed funds futures, up about six percentage points from a week ago.

The yen climbed to 103.78 per dollar after earlier touching 104.64, its weakest level since July 29. South Korea’s won extended declines versus the greenback Thursday, slipping 0.9 percent in a third day of losses. The country’s central bank held its key interest rate unchanged for a fourth month as policy makers kept a wary eye on soaring household debt and possible economic headwinds.

Stocks

Hong Kong stocks headed for a six-week low, with the Hang Seng taking its four-day loss to 3.4 percent. The Hang Seng China Enterprises Index dropped 1.3 percent, with Air China Ltd. and China Pacific Insurance Group Co. plunging more than 2.3 percent. The Shanghai Composite Index was little changed.

The Topix index fell 0.2 percent after erasing a gain of as much as 0.9 percent in the morning session. Toyota Motor Corp. and Suzuki Motor Corp. rose 0.1 percent and 2.8 percent, respectively, after announcing Wednesday they will be exploring a partnership. The Kospi index in Seoul dropped 0.6 percent, even as biggest stock Samsung Electronics Co. rallied 2 percent following a selloff sparked by the company’s withdrawal of its flagship Galaxy Note 7 smartphone. India’s Sensex slipped 0.9 percent as investors returned from a two-day holiday.

Thailand’s benchmark SET Index lost 1.4 percent, and is poised to enter a correction after falling more than 10 percent from an August high. The gauge has fallen every day this week after the royal palace said in a statement on Sunday that 88-year-old King Bhumibol Adulyadej’s condition was unstable. The king is a symbol of unity in Thailand, which has had 10 coups during his seven-decade reign. The baht has tumbled 2.3 percent this week, the most in a decade.Futures on the S&P 500 slipped 0.6 percent to 2,118 after the underlying benchmark eked out a 0.1 percent advance on Wednesday, rising from a one-month low. Shares of Wells Fargo & Co. climbed in extended New York trading after the bank’s chief executive officer, John Stumpf, stepped down amid a public outcry over fake accounts.

Bonds

Sovereign bonds advanced as China’s trade data sent investors toward safer assets. Benchmark U.S. 10-year yields slid three basis points to 1.74 percent, after climbing to the highest level since June on Wednesday. Australia’s 10-year yield dropped seven basis points to 2.24 percent. The yield also fell from its highest level since June in its first decline in almost two weeks.

China’s exports fell 10 percent in September from a year earlier, while imports declined 1.9 percent. Lackluster trade data may increase pressure on the yuan at the same time as new property curbs threaten the nation’s growth rate.

“The Chinese economy is going to be weaker,” said Kazuaki Oh’E, the head of fixed income at CIBC World Markets Japan Inc. in Tokyo. “There’s a flight to quality.”

Commodities

Oil extended its decline below $50 a barrel after U.S. industry data showed stockpiles grew and as differences emerge within OPEC over how members will share output cuts. West Texas Intermediate crude fell 0.8 percent to $49.80 a barrel, bringing its three-day drop to 3 percent.

Base metals slumped amid concerns over China’s economy. Nickel sank as much as 1.6 percent on the London Metal Exchange, reversing earlier gains. While metals have advanced into a bull market this year as China’s economy stabilized, signs of an export slowdown are now clouding the outlook for global demand.

Gold rose for a second day, and platinum rebounded after entering a bear market on Wednesday. Corn advanced following its steepest drop in a month, adding 0.4 percent with wheat. [Bloomberg]

FTSE 100 Outlook and Prediction

FTSE 100 Prediction
FTSE 100 Prediction

As mentioned yesterday I think shorting the rallies is still the best play, with the 7070 area looking a good entry point today, should it get there. It feels like the bears have finally managed to find a bit of strength after a couple of sessions of faffing around, probably while everyone has been watching sterling to see what that does and if a trip to 112 is going to happen again. Gold has started to rise from the 1250 level so the bigger picture play of short indices, long gold for the rest of the year seems to be starting to come to fruition. 7130 was tested twice and failed both times, so set up a decent double top pattern – if it were to get there again then it will probably break, but its a fair way away at the moment.

The bulls will need to hold 6990 initially, but if this breaks then 6970 is pretty key where we have S2 and also the 20 day Raff channel. This level is worth a long off but keep the stops tight – below this then there is a fair bit of fresh air – 6880 level is possible, with a brief pause at 6920. If the bulls do go for it then a rise to 7070 level would be ideal to get short from, though we have the pivot resistance first at 7045. Short from here and 7070 are both worth a go.

88 Comments

  1. Morning all, I closed half my short from 7120 at 6969. Moved stop to entry and waiting for further falls.

      1. Cheers. I took some of the table as better to take some profit when it’s there.still learning and trying to be repeatable

      1. Think it may rise up again. My plan is to short around 7000 again if 7000 proves to be resistance

    1. I longed a bit early from 81….. I held my 40 long all day yesterday in expectation of 7100 again but removed it last thing for 1 pt lol :0) I will try again tday good luck all….

        1. An encouraging push higher here accompanied by a 25 pip rise on cable….that’s bullish in my eyes…

  3. Morning, lots of 🙂 bears about this morning!
    Still don’t think the fat lady’s singing just yet, 6960/70 held ok but looks like a bit of a short term lid on things around 85.
    Slightly nervous long like Nick at 70, stop 50 see what happens (not much I think) before the rather sorry looking DOW opens.
    Some day someone’s going to have to explain to me if a US rate rise is bullish or bearish. No rush.

    1. Positive breakout through 85, I doubt we’ll fill the overnight gap from 24 but can see a couple or three hours of grind up coming, before a pre DOW pullback?
      Will look to be out of long by about 13.30.

      1. In theory the current 85 revisit should hold, so replaced some of the long I took out at 7000 (not a preplanned target, just on action).

        1. Hmm, not so clever.
          A bit more long on rsi at 71, dumped that and the 85 at b/e 78 just a small original long left at 70, 10 pt stop.

          2. Hi Rick, yeah I’m a bit weak hands today, I think 65 will continue to hold, but that was the third visit this morning and am a bit wary of them.
            If this lethargic bounce off 70 doesn’t break back above 85 then it’s a morning’s head and shoulders to carry into the afternoon and as Nick says, underneath 65 there’s maybe 40-80 points of fresh air.

          3. Hi tmfp, I am all out at 78 for now, will be back around 1… 6920 is possible today considering the rate hike conversation from FOMC meeting last night and commodities are weak today. I think if we are near 6980 around DOW time and RSI is high on 3 min then shorting sounds like a plan but we will see soon, 7000 at 10:0am was a nice short on RSI 10 3 min 🙂

  4. Hey tmfp
    I’m so glad I’m not the only one who’s confused on that front! 🙂
    Wish I could get the dollar index showing in MT4 (intertraderdirect) – I have to settle for a few of the major fx pairs. USDJPY is my main one for dax.

  6. LoL – Morning chaps..Well this is like the reunion of the Magnificent Dozen.
    Would be good to hear from WSF and Senu if you’re around.
    Hope everyone’s doing OK and surviving the ups and downs..
    🙂

    1. Morning Hugh – I was also away for a bit during summer to get some proper sunshine! Hope you are keeping well though?

      1. Morning Hugh….nice to see you back on here…..not seen WSF for a while and it’s been even longer for Senu…..best of luck mate….WSF and Senu ,,chime in if your about…..be like old times :0)

        1. Hi Anstel…Yes I have stopped by – but find these boards draw me in & then the day just dissappears …
          Sounds like you’ve been doing OK anyhow & making some brave calls to the upside – not easy.

      2. Hi Rick – Been working hard (DayJob) as well as being on Nick’s trading board (plenty of nutters on there as well :-))</i)..still besotted with the Trio –

          1. Hi RJ – I think you’re referring to the Trio set up.
            Yep – it’s still good. It’d would be useful if IG would get PRT 10.3 introduced..

      1. Hi tmfp – It’s OK – sends you round in circles a bit.
        BTW – I’ve booked my CBT for 25th October – Module 1 & 2 thereafter 🙂

          1. I’m hoping so. Eyes open and on the understanding that everyone on the road is out to finish you. !
            Do you go to Spain on two wheels ?

          2. Oh yes, recently back from 2500 miles in Spain and Portugal on the bikes. Love it.
            Riding an Enfield Bullet in India Christmas/New Year.

          1. The only positive there I can see is we ain’t melting down without a weak DOW, and they’re going to have to break 18000.

          4. I’m seeing 6930 – 6955 as a book squaring zone from the 3rd October. Must be alot of Shorts around here that will want to be squared up & have been left stranded.
            I can feel a Jackson Pollock moment coming on – but will resist…:-)

  8. how wrong I was and that where its good to use stops 🙂

    I have gone long on Dax 385 with a 30 point stop. will see if 465 gets tested again.

  10. Not sure what to do here, pleased with that short but not convinced there’s huge lot more downside before the DOW, even though technically we are below support.
    We’re asking -100 from the DOW already which puts them just on their month long 18000 support, although there’s plenty of RSI downside room.
    Although cable is confusing things, sentiment is key and -200 on the DOW would put the cat and pigeons in a right old mess.
    Could be a crucial afternoon, Mr. Sensible says bull, Mr. Bear says Yeeha….
    Thoughts?

    1. Comes back to the same old chestnut – can’t leave in it cash – bonds yielding nothing – (& I don’t think they’ll raise in December – they’ll talk about it, sure – but they won’t do it) – so equities. We are were we are…

      1. well done Si – only another 130 points for me

        tmfp – nice to see you. must be going down with you back

  14. I’m loving this drop. Only been back with spread bets for 6 weeks after a 2 yr break and already account is up 50%

    1. Well it has, but the world appears to be still turning 🙂
      The close will be important, an intraday 50/100 point tail wouldn’t have much significance technically.

  21. Hmm oil just got a massive kicking due to inventories, but indices hardly moved…
    Lots of buying into the close maybe ?

    1. Well that seemed to work out as a theory… and also oil retraced all its loss from inventories… glad I don’t trade oil 🙂

  23. Nice run up into the close and held after, ended up with a few points and short at 84, looking for the DOW to drift away back down, no heroics though.

  24. Hello all, had manic day so not posted. But all good, FTSE coming good and I have closed some shorts and a few longs.

    Been longing and shorting Dow and even too 80pts out of oil!

    Still not recovered my GBPUSD losses fully but I’m 70% there.

    I was within 20pts of breaking account!

  25. I’m still short on Dow and GBPusd as well as FTSE !

    I asked for a drop at the start of the week and it was granted! Thank you whatever forces made that happen !!!

  26. You heard it here first, I think we are going to see a massive fall in Dow and other indices tomorrow, a proper big Friday clear out !!!

  28. Well, sympathetic as I am to the bears, that’s a bullish hammer candle posted today on the DOW, and tomorrow being Friday I can honestly see further rises.
    They haven’t had a weekly close below 18085 since June, why start now?

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