Got the 6310, will it bounce? (for a bit anyway)

Daily Raff Channels
Daily Raff Channels

Good morning, well yesterday turned into one of those trending days that doesn’t suit my style at all, with the longs at 6385 and 6350 both getting stopped out. My other support level was 6310. I didn’t long off that one (was out of hours at about 10pm) and guess what, that one bounced!  Typical and sometimes it just isn’t your day. Still, after Mondays lucrative day can’t really grumble and I had tight stops on the longs anyway so minimal damage. I do find that it pays to make sure your entry levels are key, rather than just placing trades willy nilly, go in at recognised levels, that way you can have a tight stop, and if the price breaks below such a key level then generally it will go further. I am attributing yesterday’s fall to the ongoing US deadlock situation, and it sounded like Obama is getting fed up with it now too during his speech yesterday – accusing the Republicans of ‘extortion’. Today sees him nominate Yellen as the Fed chair to replace Ben Bernanke. Markets should be happy with that as she will maintain similar policies to Bernanke (mainly QE). Even yesterday’s positive news from the IMF (or about face, depending on how you look at it) on the UK economy couldn’t stop the falls, and they have revised their latest guesses to 1.4% growth this year and didn’t lay into Osborne this time. That’s double the rate they guessed in April. I keep saying guess, they call it a forecast. One and the same in my book. Osborne will be delighted that he can stick 2 fingers up at them I imagine!

Asia Overnight from Bloomberg

Asian stocks outside Japan fell on concern the impasse over the U.S. debt limit may lead to a default and after the International Monetary Fund cut its global outlook. Japanese shares reversed losses after the yen weakened.

The MSCI Asia Pacific ex-Japan Index slid 0.3 percent to 465.36 as of 1:53 p.m. in Tokyo, while the broader regional gauge rose 0.1 percent to 138.65. Japan’s Topix index rose 1 percent, erasing a 1 percent loss. The Standard & Poor’s 500 Index slumped 1.2 percent yesterday after President Barack Obama said the U.S. economy risks a “very deep recession” should Congress not raise the $16.7 trillion borrowing limit.

“Markets don’t like indecision and bickering by the government,” said Angus Gluskie, managing director at White Funds Management in Sydney who manages about $550 million. “Political parties are prepared to use these agreements as a bargaining chip. You certainly see a point of nervousness and concern for investors.”

The International Monetary Fund cut its global outlook for this year and next as capital outflows further weaken emerging markets, and warned that a U.S. government default could “seriously damage” the world economy. Growth worldwide will be 2.9 percent this year and 3.6 percent next year, the IMF said, compared with July predictions of 3.1 percent for 2013 and 3.8 percent for next year.

S&P Futures

Futures on the S&P 500 gained 0.3 percent as the White House prepared to nominate Janet Yellen to succeed Ben S. Bernanke as chairman of the Federal Reserve. Yellen, vice chairman of the central bank since 2010, has articulated the case for maintaining accommodative monetary policy.

“Generally people feel Yellen will take a line that’s not dissimilar from Bernanke, which will be reasonably dovish and accordingly supportive for markets,” Gluskie at White Funds Management said.

FTSE Outlook

FTSE 100 Prediction
FTSE 100 Prediction

It doesn’t look that rosy for the FTSE and I have mentioned 6200 early November before though it looks like it might come sooner. With the close below the important 6390 level I might even go so far as saying that we could be on for 6100, maybe 6060. However, once that has dropped then it does set up a  year end bounce so I think we will still end the year looking alright. Today’s pivot is 6389 and I think the bulls will fight back a bit this morning, as they often do after a trending day, and prices will rise to that level. However, there is downside pressure and failure to break that level will see another drop. We are certainly testing the bottom of the Bianca channel at the moment, once again with all 3 clustered around 6340ish. Bulls need to exceed 6460 to invalidate the bearish tones currently persisting, though we have had a decent bounce off the 6310 level mentioned yesterday, and also the bottom of the Raff channels. For today, 6385 also marks the 61.8% fib retracement of yesterday’s fall, so coupled with 6390 being previous support, the daily pivot and that I expect that level would be good for a short entry. All the while the US uncertainty continues the momentum is with the bears, however, a resolution on that and the debt ceiling could see that change back to bull. Maybe after we get that 6200 though!

68 Comments

    1. I was surprised to know that you lost???? I remember you’re saying: I’m going short from 6390 and telling me: 390 was broken. I thought you held… How come you lost?

        1. Oh, sad to hear that. You must have done it between 3-4 p.m. when I was still hoping it will go to that 6490.

    1. Got very scared to trade now, it must be a shock of yesterday. Don’t trust the price any more.
      Just called off the emergency money out of my account which I added yesterday to maintain whatever positions I was holding. Now back to where I was on Monday. Fresh start, eh?

  3. Taking a different medium term approach . The FTSE is expected to bounce by year end. I am currently long effectively at 6430 which I don’t think is a bad level – expecting at least 6550 by the end of the year. Will be looking to buy on the dips at 6225 and 6080 – 6100.

  4. Long till DOW opens? Lost 30 odd points after yesterdays fiasco, recovered about 20, just waiting on the drop possibly towards close.
    Wednesdays i find tend to be slow days, so just trade the trend

  7. 6486/87 definitely looks like the way to go, good resistance.
    Senu don`t buy at 6340, better off just selling at 6380ish as we saw yesterday it can go down one way.

      1. Btw congrats on your short al. I take it you don`t do day trades, but from point A to B. Kudos to your patience man.

        1. thx. correct I don’t have the time intraday.. plus it’s a very difficult game intraday, I used to trade 4hrlies but my “edge” was very slight. Trading weekly charts avoids the noise, allows you to interpret market trends and gives you plenty of time to think about a potential trade. Problem for some people is it’s too slow for them, and they always want to be in a trade, when in fact you should be sitting aside. Hence you need the patience as you said.

  8. Market placing traps to keep stops of 10-15 recommended. Might short prematurely at 6370, then add on @ 6380.

  9. “and they always want to be in a trade, when in fact you should be sitting aside” – very important, this is were people make loss including me.

  15. Senu, I have an order to short 6485, I may cancel or alter it. Not planning to trade until I sort my brain out.

    1. Sorry I meant 6385, cannot get used to being at 6300is yet.
      However I took a little short in the morning from 6468 to 6460 on high stakes. Just to help me get covered.

  17. NASDAQ/4hrs falling like a stone. Come to think of it, the Dow’s downward trajectory is pretty steep.
    Where will it end Terry? PDQ please. 🙂

  19. Hi guys,

    I am quite new here and new to trading so excuse me if I sound like a newbie.
    Anyway my thinking with the FTSE is that we will see steep drops until mid next week when the US short their lives out.
    My betting is that we will see at least 6100 if not 6000. I am kinda tied up in the long term (newbie mistake), but I keep my balance sheet balanced with short term shorts. So far so good. Anyway, nice site and sound advice so far. I recon we will see a bounce tomorrow, but we will end the day on a loss again…

  20. Only game in town until October 17th deadline (they will take it to the wire like last December) is short the rallies buy the dips in that order…load up with profits from first leg (short) then release..and again..and again…

    1. Thanks, exactly what I thought and have been doing. One of my colleagues, also new to trading lost £11k this week, because he is not bothered to read!
      My takings are at least up, so not too bad. Just hope it’s not beginners luck 🙂

  21. Dow still holding off from 14660 which is key…….if it can build some strength around 14800 like it did last time then we may see a decent rally especially when the debt ceiling is finally resolved. I agree that it will go to the wire and we may only see a half hearted rally at best as concessions will have to be made on both sides…….but at least it puts off tapering for another month…….

    Buy the dips till year end.

  22. Javed buy the dips is of course sound advice.
    But i doubt many people would commit too much resources to a guaranteed long term trade.
    Out of curiousity, how many pips do you stake as you need a large margin.

  23. Wow havies, he’s ‘new’ and lost 11k in a week, poor guy, we’ll get to him meet our very own Jack Two.

    1. LOL. At least I didn’t lose 11 grand. All I need is 300 points to get to my starting capital.

  24. Ahwab – My stake on the FTSE is £20. I also trade the Dow and Hang Seng and specific trades on Singapore – STI. Have to maintain my discipline not to overtrade as trade size is key for everyone. At times was undercapitalised as was losing 80% of my start of year balance. I don’t like that to dip below 50%. So will look to put up more capital per contract – ideally £1000 but probably around £800. Fortunately the strategy has paid off since May and have doubled my money. A couple of percentage points rise to yearend will round off a decent year. Average return is 90%.

  26. Best advice is to get out…….30k losses are warning signs! What is that as a percentage of your investment?
    My advice remains to buy the dips at 6338, 6225 and 6080 and hold till the year end. However it all depends on your trade size and time frames as to what is the best strategy for you.

  27. I brought 5x ftse n 5x Dow over last two month.
    Mean that long at those level?
    I am new.
    Dunno how to catch the dip. When I saw ftse jump up then I brought it at that time later on drop back to zero.
    Pls advice best strategy?
    Thx

  29. Tan – I have given you the levels that I believe are good entry points on the dips….6338, 6225 & 6080. Put a third of your stake at each level and have enough to cover down to 5900.Most observers think we will get a good rally to the year end. Even if only 1% thats 60 points but 6500-6600 seems to be the consensus. Probably won’t recoup your 30k but that will take time.

  30. I keep on hearing the question “what do you think…” don’t guess or try and interpret direction based on some opinion. Simply learn to read the market and how it works…i say “simply” that means years of learning…

  31. Very true Al……can’t base investment decisions on what some random bloke says on the interweb. By all means people should be rationalising their trading decision making here as I always try to do…..if for no other reason it helps to convince themselves. But to ask random people what they think the ftse will do in the next 10 minutes beggars belief……you’re better off tossing a coin.

  32. Javed, i must admit i think you’re probably right it’s heading to a new high in the last qtr, however it’s not a done deal so at what point do you stop buying the dip below 6080? A new bear market is due so a 30%+ fall to say 4800 is not beyond disbelief… Where is your throw in the towel stop?

  33. My nerves could no handle averaging down in such a way. I will wait for a couple of strong up days after any pullback and look to enter then. Maybe miss out on a hundred points or so but usually works well for me.

  34. I cannot see a bear market starting for a few years yet. Interest rates are low and will be for some time. To get good returns the funds have to be in equities. Earnings will start to flatten but where else will they invest? Even though we have broken highs in figures if you include inflation we have still not beaten the prev highs. We may stay flat for the rest of the year and into next but that is great for this. A nice steady range bound market is great!

  35. Likewise Al what is stopping the ftse to go up to 6800. Javed is making his assumptions based on chart analysis rather than the political environment as no-one can predict the market. Just look at 2008/11.

  36. I agree with Javeds likely ftse move higher in fact i think we will hit 7100 but we can all be wrong including me. Im just wonndering what Javeds Stop is if he and myself are wrong…?

  37. Al – my stop would be around 5850, having effectively gone long at around 6,150. 5700 would be a complete retracement of the current rally that commenced around this time last year.

    Ahwab – Need to look at both technicals and fundamentals. Technical may provide entry and exit points but only a view of fundamentals can provide a view of direction. Personally I think we are in an improving economic environment…..employment and growth are increasing both sides of the pond and the Eurozone is relatively stable. Tampering should have a limited effect as it has to coincide with a stronger economy. That’s not to say there won’t be a sell off when it is finally announced but once the dust settles the market will take it in its stride.

    Nothing goes up or down in a straight line. The market is having bit of a breather but has bounced a bit off the 6338 and 14800 levels. Only next week’s political events will tell whether the bounce can be sustained or we do head lower to 6222 and 14300 in the short term. For me though that would be a buying opportunity but of course my strategy is different to others here.

  39. And there’s the bounce. Inevitable after such a bad fall. On the short now too. I think we will see at least 30-40 points drop from here…

  40. Not sure at all. Ireland that there might be an agreement looming in the US, that’s why the FTSE is doing so good….

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