Pivot resistance 6837, support 6810, which will break?

Good morning. Are you an optimist or a pessimist? It feels like the FTSE is in a bit of limbo currently and if you are an optimist then it will be pausing before further rises, 6810 will hold and all is good. If a pessimist then failure to break 6860 shows weakening bulls and this limbo land is the start of the declines. Personally, while 6810 holds I am optimistic, but ready to jump off that ship if it does break. Overnight we had weaker than expected Chinese flash PMI, hence the drop at 1:30am from 6850 to 6810 (which one again held…just) to bounce back to 6825. Not very inspiring though. Once again we are testing the bottom of the 10 day Bianca channel at 6826. Tuesday’s pivot level was better for a bounce!

Good results from Netflix after the bell last night saw the S&P reach 1850 again; Netflix said it added four million new users in the last three months of 2013 to give it 44 million international viewers.  It also reported a jump in net profits to $48m (£29m) in the fourth quarter from $8m for the same period a year ago.

Asia Overnight from Bloomberg

Asian stocks fell, with the regional benchmark index heading for its first drop in three days, after a gauge of China’s manufacturing unexpectedly contracted.

The MSCI Asia Pacific Index fell 1.1 percent to 138.46 as of 3:11 p.m. in Tokyo, with all 10 industry groups on the gauge dropping. The measure extended losses as a private gauge of China’s manufacturing dropped to a six-month low in January, adding to signs growth in the world’s second-largest economy is slowing.

“Growth in China isn’t going to pick up as the government is focused on rebalancing the economy and reducing reliance on credit,” Manpreet Gill, a Singapore-based senior investment strategist at Standard Chartered Bank, said by phone. “While Chinese equities look inexpensive, they lack catalysts. Ongoing reforms in China will be a key challenge for markets this year.”

The preliminary reading of 49.6 for a Purchasing Managers’ Index released today by HSBC Holdings Plc and Markit Economics compares with a final figure of 50.5 in December and a 50.3 median estimate of 19 analysts in a Bloomberg News survey. A number below 50 indicates contraction.

Futures on the Standard & Poor’s 500 Index slid 0.3 percent today. Most U.S. stocks rose yesterday as investors assessed earnings from companies including Norfolk Southern Corp., Coach Inc. and International Business Machines Corp. The S&P 500 added less than 0.1 percent, with three stocks advancing for every two that declined.

FTSE Outlook

FTSE 100 prediction
FTSE 100 prediction

Today’s pivot is 6837 and the first time for a while that it’s above the opening price, its therefore likely to act as resistance and COULD be a signal that the sentiment is changing to bearish. The key level will be 6810 – if that breaks then I think the change in stance will look more certain and a close below the 10 day Bianca channel even more so. I have put a couple of shorts in the trade plan below, both of the key resistance levels but as mentioned at the start we are kind of in limbo and this area will either be the point at which it turns lower for a few weeks of declines, or is building a base to push for 6950. Its hard to say with any certainty at the moment!

Scenario below is the optimistic option, with the 6810 holding, after a dip from the daily pivot. After yesterday being relatively weak, the bears might feel a bit stronger to short off the pivot.

95 Comments

    1. Yes great call – didnt like the pivot or 6810. I am presently in the pessimistic mode (well optimistic for me as I am only shorting any rises!). Had one overnight and one just now. Plus what a fantastic trade on ebay last night. Grabbed 10%+ rise and now shorted it. Doesnt always work that well!

  3. Lucky me, overnight setup an order to buy at 6825 with limit 6860. changed my mind and sold it at 6832. 🙂

    1. And off the pivot so jury out. One thing I have learned the hard way is to always keep an open mind on what it is going to do. This could go either way (what a prediction that is!)

  5. Bulls are getting weaker and Bears stronger. If the resistance at 6840 does not break today (probably around Dow open), then we will see a bit more bear. I think all the markets are preparing for the Fed meeting next week and depending on the outcome will move either way.

    PS: DOW still in a negative trend from 1st January and normally January sets the mood for the year and if the DOW cannot close that gap it may be a very bleek year, besides everything seems overvalued and overbought, so can see my 6300 mid March 🙂

      1. Consider this:

        Positive Januaries have been followed by full-year gains in 61 years, or 52% of the Dow’s total. Negative Januaries have prefaced yearly declines in 27 years, or 23%.
        That makes 75% of the Dow’s history where January and full-year performance have been in synch

        Now the DOW opened on Jan 2nd at 16572 and closed yesterday at 16373. (PS: Jan 1st was a holiday)

        That’s the negative decline I am on about. Considering the statistics above is what I made my statement on. I may be drawing wrong conclusions or we might see the other 25% of the time on the DOW, but just saying that if things do not pick up for the DOW I cannot see the gains we had last year happening again. Oh and the 6300 was for the FTSE, not the DOW…

        Oh and that’s just my opinion…lol
        Gl anyway 🙂

          1. Yes, a couple of days to come yet, so let’s hope it picks up nicely then eh?
            Just hope the FED makes the right choice…

            Just remember that the DOW can shed or gain that 200 points in a day, so I am telling things as they are today. If things changes then my statement stays the same. If January yields a positive outcome for the DOW, then we will be looking at a good year 😉

          2. And another piece of statistic for you:

            In the last decade the Dow has never gained more than 300 points between Jan23 to Jan31.

            The last two years January has yielded in excess of 300 points up for the Dow from 2nd January to set the mood for good progress through the year.

            Let’s hope that the first statistic does not repeat 😉

    2. The SPX is a far better yardstick for the US equity market and it closed @ 1848.36 on 31st Dec, currently still negative for January…

  7. Got my long in the morning, went long at 6717 for 15 points as long as ftse is in a bullish trend I am not shorting… Maybe scalp but that’s it.

  9. Well, if you are US investor and got some FTSE stocks last year , lets say June/ July then boys and girls they have a very heavy lose on the portfolios! The £ to $ was ab. 1,50 at the time so do the maths. If they kept the stock then they are 10% down and need to drug the FTSE up just so they can close position without a lose. I don’t think they have much chance for the £ to drop to that level any time soon…..so lets wait and see, they may just jump the sinking ship and then the FTSE will fall like there is no tomorrow…lol

  11. Yes but what triggered that drop. My latest short was looking a bit dodgy but now in profit to not complaining.

  12. Dow has some work to do before Jan 31 now. Its not looking good and with the FED meeting only next week I dont see the DOW clawing back 600 points in this short a time. What do you think James?

    1. most of the world is wondering about the Federal Reserve and whether or not it can taper off of quantitative easing, and with the jobs numbers been so week last month, that seems less likely at the moment. Besides, even if the Federal Reserve did in fact taper off again, is going to be very slightly, and therefore nothing that drastic that could cause issues in the bond markets.

      Speaking of the bond markets, as long as yields are so miniscule, people will continue to favour dividend paying stocks and that is where the Dow Jones Industrial Average comes into play. As the stocks all pay nice dividends overall, and we are in a low yield environment, it makes sense that the Dow Jones will continue to be in demand, and therefore continue to push higher.!

          1. And what would that mean for the markets. If they ramp up again, then markets fall as the worry would be that they don’t have confidence etc…

  19. Held shorts at 3 levels for over a week…many a time hovering over the close position button for a heavy loss….but then just kept telling myself to trust my original theory and strategy.

    Now closed for a profit and will re-evaluate. I need to have a think about my stop-loss levels, and things were starting to get out of hand. A lesson to all!

  20. Anyone know what the next support level below 6780 might be incase we break through this level ? Holding medium size short with both sell and close buttons open !

  25. surel there must be a massive gap on the DOW and S&P now. Woun’t this have to close at some point?

    2. surely this magnitude of fall needs to takke place in the cash market and not in the futures market

  26. Still on sidelines for me…atleast we have broken our range which ftse has been since like 27th dec 2013..

  32. Kicking myself for that closed short on Friday. This is getting close to buy time now though. I will be looking to get in long from next week.

  37. All shorts closed out today.

    Thinking we should see a correction and a move upwards tomorrow.

    1. … cleared it out earlier in the week, back to long 6765 this fall is overdone over on this side of the pond $65-$75 billion of fed money going in for the next couple of months, the backdrop is good longer term than today stay long 🙂

      1. i closed some & let some run. Could well bounce back for a feel-good Friday. If it does I’ll look to short again. gl

  41. down abut 90 points on the dow….not closing this until the gap from the open is closed….it could take a few day but staying in!

    This move is overdone and lacks anything substantial behind it.

    1. but there is still a massive gap between 16322 and 16269….surely that can not stay open for too long?!?!?

  45. Ravi thank made a bit. It’s been a good day after a long time, this FTSE can’t make its mind this month.

  48. Yes although amazing how it nearly touched 6800 overnight. On sidelines at moment. Waiting for it to either decisively break 6780 or 6765 – but I am only going to consider shorts today

    1. I would be very wary of shorting weakness at the moment, I went long last night with a target around 6850 but closed @ 6786 in the wee hours

  50. In free fall at the moment – looking for some price action when it tries to push up to gauge short – but its not doing so at the moment!

  51. Can I ask you something about Dow? Really I first time looked at this market today and noticed it is 4 point spread at the moment. Does it always stay like this? On CityIndex it said 1 point 8.30-15.13. But it is now and it’s 4 points. Is it something to do with the (GMT-6) indicated there? I presume that I need to add 6 hours to find out when 1 point spread will start? Could you clarify to me?

      1. Now it’s 4 point spread on my platforms (both on CityIndex and Spredex). Although on CityIndex it is said that it is 1 point from 8.30-15.13 (I presume in American time) but on Spreadex it is 2 point spread. I am mostly confused about the time it changes for 1-2 point per spread.

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