Good morning. Friday was a bit bearish wasn’t it! Fears over the global economy set markets tumbling and the FTSE carved through all its supports, hitting a low at 6535. As I write its bounced back a bit to near the 6600 level so maybe all is not quite lost for the bulls at the moment. Having reached the 6850, it did look like we were going to reach the ultimate target of 6950ish before the big drop, alas the bulls fell at the final hurdle. I am mindful of what I said back in December about the dip from 6850 /6950 towards the 6000/6200 area for March, as per the weekly chart I have below. Anymore days like Friday and we will see that level this week! The markets started getting spooked by the weakening state of China based on the data that came through last week, and data today show slowing manufacturing.
Apple is projected to report 5 percent sales growth and a 2 percent profit increase today for its fiscal first quarter, typically the period when Apple generates its biggest chunk of revenue. There are a few big tech companies reporting this week – I expect that they might be good as tech does seem to be the area where consumers are still happy to spend.
Asia Overnight from Bloomberg
Asian stocks declined, with the region’s benchmark index heading for its steepest loss since June, as concern that the global economic recovery is faltering spurred investors to sell riskier assets.
The MSCI Asia Pacific Index dropped 2.1 percent to 134.79 as of 3:07 p.m. in Tokyo, extending four straight weekly declines and headed for its lowest close since Sept. 6. Japan’s Topix index sank 2.8 percent as the yen touched a seven-week high versus the greenback. Global stocks tumbled the most since June on Jan. 24 as a sell-off in emerging-market currencies prompted investors to seek havens.
“Optimism among global stock investors is waning,” said Tetsuo Seshimo, a Tokyo-based portfolio manager at Saison Asset Management Co., which oversees about $791 million. “Markets are losing momentum after rising a lot toward the end of last year.”
The Asia-Pacific equity gauge is set for its biggest monthly decline since May after 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. Shares on the measure traded at 13 times estimated earnings Jan. 24, compared with a multiple of 15 for the Standard & Poor’s 500 Index and 14 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
Futures on the S&P 500 added 0.2 percent today. The equity gauge tumbled 2.1 percent Jan. 24 and has declined 3.1 percent this year.
FTSE Outlook
While I have been writing this email the FTSE has sneakily rises about 15 points and is now above 6600. With the daily EMAs having crossed now the initial target for any rise is the 10ema area at 6709, though that’s a big rise to put in today after a very bearish day. but never say never! With today’s pivot at 6701 and things now in a downtrend, I am holding a short bias and therefore 6701 area looks like a good place to go short. We are below the 10 and 20 day Bianca channels and with a breakout like that it will take a few days for them to recalibrate and prices to get back within those levels. However, the longer term 50 day channel bottom of 6572 – a level that I imagine it will be testing soon (don’t forget the weekly scenario). With the channel breakouts the supports can become resistances so 6671 and 6711 might present the bulls some trouble today if it gets that high. Ultimate high today is 6738 – if the bulls exceed that then we might turn bullish for the rest of the week.
On the IG charts there are a cluster of pivots around the 6650 area – daily, weekly and monthly – so I expect initial resistance for this early morning bounce around there. However, the EMAs are turning up and there are a few weak bullish signs, so a rise to 6700 is still possible, though I think a short off that pivot level will work alright.
can see dow dow under 15850 again today , especially at opening , i presume it will bring ftse down with it 6540 ish, however i feel we may then get a decent push back up over 16000 by end of week with ftse at 6700 levels sometime soon thereafter , will be some gap filling with fridays drop to keep imn mind also
The daily trend is down, so short the pops is best to play ?? there again we have hit 6540 overnight which will have folded all weak bulls and one could say we are in a daytraders uptrend from the lows…
Germany moved, Dow move, FTSE didn’t.
Finally turning out to be a decent January for me as have been short from effectively 6710. Now looking to go long at the end of the month right upto the end of April. In the short term 6530 and 6460 are targets this week for an entry point to a medium term target of 6900 by the end of April.
GLA.
Thanks Javed.
My belief is as per nick mentioned. If the sell off on friday was bssed on fears over emerging markets and global growth, the fed should not taper. But if there is tapering and its 10-15 bill+, there will be a 6200 soon. And i hope we get it.
I bet nobody embarked on this short since 8am
Indicator has turned into a decent bear..looking for entries now.
I went short last night at 6598.but might close soon depending on us open price action.futures are showing 6518 though.
Jack two: have been short from last friday.
Was the obvious choice 2bf
Well done on your shorts btw. You must have done really well.
Not great, closed with minimal loss but still lost money. It wasn’t a great move to go short so early. It wore me out of fear when it was at the highs.
It teaches me once again. If it’s a wrong trade it’s better to close on stop loss and do not hope it will definitely drop down. It will eventually but it will wear you out of patience and when the last drop of patience will be gone it will turn… without you on board.
I thought I would be patient now, but well, it proves I should never rely on it.
Who would have known it would drop faster than we thought, I had orders 6860, 6880, 6900 to add.
The markets are always against you.
My view is that Fed wont cut back on QE again in the next meeting…this will provide a spike for my short entry.
FTSE to finish above 6,600
Hashmash, if they do cutback, youll have missed out as everything falls.
Dont forget, they want to stop QE by early next year, in 10 bill increments.
Chances are they will cutback more.
Will be hard for me to miss such a trade..
because i will trade upon the info on the meeting as well..
been doing it everytime, its very risky and stressful..
but if they do cut, then im going heavy short, RIGHT AT THE ANNOUNCEMENT.
if they dont cut back then im holding my guns for the reaction and then hopefully short at around 6680-6700ish
But i really do not think they will cut back right now. too soon for 2nd cut.
Fair enough. If they do taper, it will probably come to 6000
If not, 6700+
Alot hanging on this meeting in my view
Btw hash how much pp do you normally go for? I notice you like trading “heavy”
i dnt want to say how much i trade pp, last time i did that i had a lot people pointing fingers.
but obv if i trade RIGHT ON the annoucement i wont start off as a heavy position, but put in a moderate amount, we all know how markets like to move around at such times, then eventually build on as it moves, but if i get it correct i should be in heavy position by end of that day.
… if it comes to 6000 because they taper, the markets will be in a real mess with a further $65billion to go, that suggest a ftse of around 3500-4000 at this rate just because of the taper …. Nick issue a new graph 🙂
yes, weekly wont be much good then!
Hubris, we had near 6000 last may when bernanke mentioned tapering.
With EM fears, markets will drop with a taper quite alot.
Then theres the small matter of the debt ceiling
…. the USA economy is in a different place now, and the Fed’s bond buying is a USA issue, it has spread to the EM, but alot of this is just noise, many other economies are progressing well they are EM’s for a reason, there still emerging … however in the short term the media is looking for a good story, i doubt these drops will be sustained, the taper man cometh and there’s no stopping it, great buying opportunities walk by his side 🙂 … buy the dips
if we dont see a big drop (maybe a small rise first) then that either means my strategy/indicator is totally messed up (or cannot deal with such market) and i will have to go back to the drawing board..ive got a very good bear signal, need a bit more upside before it shows full bear mode.
Been waiting for 1 month to make a trade now…lol
Anybody have any thoughts on trades or orders in place? Or is it subject to 3pm’s figures in the US?
Nick
Are we going in to freefall again??
anybody thoughts?
Or is this just general volatility?
No strength in the FTSE this afternoon, just below the 200 DMA now…
The gaps appearing on most indices is a sight to behold. I wonder what catalyst will allow them to close.
Been seeing that uve been talking about gap closing..u say it as if its a MUST that the gaps will close, u should know by now thats not true.
Fair play hash, yeah i remember quite a few people challenging each other over the pp nonsense
Out of all positions, stock and indices.
Onwards to wednesday.
Will close my short now as a decent 50 point profit today.will stay on sidelines till the feds meeting methinks.
Cleaning longs with emerging markets as an extra ahead of FOMC. It started middle prior week. Talking about US. FTSE is another movie.
Anybody out there?
Closed all Shorts 15 mins ago. Dow just about to pass last weeks Low.
How Low will it go??
Is everyone waiting for Apple’s results?
Closed my shorts earlier from 6765. Wednesday will be interesting
Sorry could I ask why Wednesday will be interesting?
Fed tapering meeting. 7pm UK time
Sitting out of this one, looks too volatile, its all about reducing risk vs reward.
After the last few days I wouldn’t be surprised if we get a huge spike upwards after the fed on Wednesday regardless if they increase the taper or not.
The exact thing happened when tapering was announced in Dec – everyone expected a drop if tapering was announced, but the market had been dropping for weeks beforehand and the total opposite happened.
Obviously the American’s turned it on its head suggesting it was a good sign because the economy was in a good position to do so – which is true to an extent.
Either way the markets are becoming very volatile, too much unrest around the world politically and economically.
Something tells me its heading down regardless of what happens. Reducing tapering increases worries. Increasing tapering increases worries. As its all in the backdrop of the emerging markets concerns of the past few day’s.
No taper on wed..will cause markets to jump or a day or 2…but will drop straight after (def on friday).
Thats my view
dmors..the spike in dec was because the US was doing quiet well also it was a surprise that the tapering was small (relative to what the rumours were)..also it was promised interest rates will be held low.
In December…. I thought everybody was waiting for a Christmas rally. So it spiked.
Oh I wish I knew what the chart would look like at the end of the Wednesday.
How to trade this day, scary.
I am looking at going long back to 6800 now support has settled at around 6500.
http://www.youtube.com/watch?v=9dVxKvWOj0Q
Thanks James interesting!
What’s no point of thinking will they taper or not, the question is how to catch that move.
Thanks for the link.
I hope the Fed is looking at a chart something like this one! 🙂
http://imagizer.imageshack.us/v2/800x600q90/547/8aku.png