Hawkish Fed with rate rises | Can FTSE break above 7300 | Trading help

21st September 2017
Certainly got a “but the rumour, sell the news” pattern yesterday as we heard from the Fed that as expected rates will be going up before the end of the year and reversal of QE will begin. A more hawkish tone saw the US markets drop from the 2508 S&P to 2495 but then bounced back above 2500 to remain there overnight. The Fed’s projections point to 3 rate hikes in 2018, 2 in 2019 & 1 in 2020. They remain unchanged for now.

The FTSE100 managed to climb towards the 7300 area but has since dropped back, weighed down by a weaker ASX200 (also commodity heavy) which was rattled by a potential upset in this weekends New Zealand election. 7240 now looks crucial for the FTSE100 bulls to hold if they are going to push above the 7300 level.


FTSE 100 Outlook and Prediction

FTSE 100 daily channels support and resistance
FTSE 100 daily channels support and resistance

For today I am thinking that we will get a dip and rise, probably hitting the support area around 7230/7240 and then another try to break the 7300 level. The UK market will be looking to work out the BoE’s timeline for rate rises here and how likely we are to get one around November time, following on from the hawkish Fed stance.

If the bulls were able to push above last night’s high at 7296 then a rise towards 7325 looks possible but there is some resistance here that may see the rise stutter. Worth aa short around this level with a fairly tight stop in case the bears can take it back below the 7300 level. With the market rising and holding above 7267 then it looks a bit more bullish for the moment, and the 2 hour chart is still showing rising support, 7240 for today.

We do have the top of the 10 day Bainca channel at 7306 though which may get in the way initially for the bulls if they do manage to push above last nights high. The bigger hurdle for the bulls will be pushing above 7360 though as we have daily resistance here from the 25ema and just above the 10 day Raff channel.

We have Draghi speaking at 14:30 later which may trigger some volatility, depending on what he says.

With the US markets fighting back from their Fed driven dip last night, I think we will get an initial drop and then a rise, as long at 7240 area holds as support.

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26 Comments

  1. Still holding ftse long and impressed with stocks reaction to FED. The GBP USD gapped up last night for all of 10 seconds magically taking out short stops set above last weeks high…a preposterous reaction and naked preordained manipulation for all to see.
    So dollar up pound down for a while but stocks have gone nowhere really this week and the candles continue to say higher in the short term.
    A close above 7300 gets me adding to longs.

  2. Yesterday wasn’t an example of buy the rumour sell the fact – DOW is now higher. With buy the rumour sell the fact markets climb towards the event, spike on the initial news and the sell off.

    Last week with BOE was. Expected ‘good news’ got priced in and then it came down or look at the Apple event or Scottish referendum for examples.

    Yesterday the risk was always to the upside with expected bad news of tightening or the unexpected good news they keep/extend monetary policy. So DOW dipped on the initial news (expected) and then proceeded to climb.

    Expected good news – down
    Expected bad news – up
    Unexpected good news – up
    Unexpected bad news – down

    1. That’s exactly what I expected: climb, spike down-UP as a massive Upthrust with indicators confirming it and Sell off. (DOWN UP actually happened but it showed a retrace later and a break of the top for continuation) That’s why I even tried short 12616 from my previously mentioned price target for a short. But after entering at 12616 it didn’t look like my usual Upthrust situation not on any indicators. In fact it does look like a Downthrust, a proper Downtrhust at 19.00 on FTSE, Dax was already in bullish set up so I don’t know, it would need to close properly below 12536 so I could re-enter for short on a following Spike. It didn’t happen.
      So I close the short as as short retrace situation and I knew overnight price will go higher.
      I like your formula of DOWN and UP. Really true.

      1. I don’t trade the Dax but check out the daily chart as that usually shows you the areas of interest. Key levels look like 12900s, 12670s and 12300. It basically built a base under 12300 and when it broke out above 12300 it’s gone up to the next area of interest. Last nights high could be it for now, it’s in the right area for a retrace of the rally off the lows

  3. Still bearish below 7300. Third day of testing and it was unable to break up despite the fed. Makes no sense to be long unless 7300 is claimed, expensive 20 points. Price is acting the same way that it was on the multiple tests of 7440. Seasonality is weak until end of September and there are no new positive catalysts apart from potential Sterling weakening. Break of 7250 confirms a fresh test of 7200 is underway at the minimum

  4. 70 point range on FTSE all week, tight week but continues to close higher daily. Maybe resolution after German election on Sunday

  5. Good Morning All,
    My take on yesterday was Yellen repeating 9 times that the Fed has no idea why inflation is not higher or showing signs of picking up after nearly 10 years of low rates and QE & the labour market at near full employment. My feel from Yellen, Draghi, Carney etc is that who are all discussing/contemplating reversing QE and or raising rates albeit slowly as they want to see how the economies will react / stand up in the framework it’s meant to be in-A Free Market or Normal Market. With the amount that has been pumped into W/W economies over the last 10 years I feel the trade is to be short but be realistic. On last nights announcement and the likelihood we will see a rate rise over here this year I’ve shorted 7285 at my maximum with a stop at 7320 which will risk 10% of my account as if we reach that level I am ultimately Wrong.

  6. Nick, I’d like to disagree. It was anything but “buy the rumour sell the news” day yesterday. Where’s the sell then? It all went up. So there’s no “sell news” then.
    Or I misunderstood something here? Yesterday I even asked about it the fellows traders and they explained it to me the way I thought it was.
    There was no Sell yesterday and if you had said “Sell the roumor buy the news” I would position myself for thinking: BUY BUY BUY THE DIP. I hope you don’t mind my little input here.

    1. I agree Jack, it was more of a sell the rumour buy the fact if anything. Sell to get the news priced in, then an initial dip as the news is announced then carry on up. It was a non event really though and 50-100 point in DOW is nothing.

      1. Yeah, it was BUY THE DIP. I couldn’t fall asleep thinking about that. And reading what Nick wrote first thing in the morning I could not believe my eyes. If he said nothing I would not say anything.

        1. Sell the news is today.. I know you’re probably looking at the Dax and it rallied. But it was mainly currency, it was predictable that the dollar would strengthen so it was just a case of how far they would push the European indices up. Not far enough to dent the bear case with 7300 and 12670 holding on the charts. It often rallies on FOMC day despite the news

          1. Its all inconsequential anyway. Go short before the news at resistance – make points. Go long off support – make points – both Dow and SP.

          2. Yes, Mcg, I looked at Dax, but all of them rallied really. Dax broke the sloping tram-line and now touched the top of it so it will continue rising. There’s no much selling at the moment. Anyway what happened that happened. We need to move on to the next trade.

    2. Eh? S&P rose to 2509 over the course of the day, then at 7pm dropped to 2495? Thats a dip on the news. It then got bought back up as it usually does at the moment as we are bullish.

  7. What is your feel on the daily McG? It looks like it may amble down towards the 7250 area and if there is no upthrust from the US at 14.30 it may pick up momentum towards 7200-7215 before making a decision. We’ve also had 11 up days in a row for the Dow(and I’m not saying it’s going to crash) but the simple law of probabilities you would think we are due a down day (the record up days in the Dow in a row are 14 I think)

    1. I have major pivots at 7290-300, 7190-200, 7130 and 7090-100, plus 7380 to the upside. Bears are fully in control under 7300, 7250 is the minor support and a break of that leads to the lower targets. I’ve thought we’ll see 7100 for a while now before the next up leg and not seen anything to suggest it won’t happen yet. Taking one step at a time, it might bounce around in the 7200s for a while then break 7300, but think a dip is due across the board. I’m short and looking for 7250 to break and for a retest of 7200 initially. See what happens at that point as to whether there’s continuation

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