Retest of 6200 today? Oil Drops as Dollar Gains With China Shares

Support 6155 6140 6129 6103 6091 6084
Resistance 6176 6196 6197 6200 6265

Good morning.
Market Summary for Friday 18th March 2016
The FT100 consolidated on Friday, after a week in which it has closed near 2016 highs. This is healthy and will provide some stability to the market. Having had an initial push up towards 6250 the profit takers moved in to knock it back, but only in moderation. Unfortunately from just below the 6248 short order!
Recent gainers saw the most profit taking with commodities (including gold) and housebuilders topping the losers table.

US & Asia Overnight from Bloomberg

  • Commodity-linked currencies lead losses against greenback
  • China signaled support for margin trade as stock angst fades

Crude oil extended declines, sparking losses among Asian commodity stocks as the dollar reasserted itself following a selloff. Chinese shares rallied amid plans to loosen margin lending curbs.

West Texas Intermediate oil fell 1.4 percent, building on losses from Friday spurred by the first increase in U.S. rigs this year. The greenback extended its rebound into a second day after slumping to a five-month low last week as the Federal Reserve pared its interest-rate outlook for 2016. Currencies from commodity exporters were the biggest casualties. With Japanese markets closed for a holiday, mining companies led declines across Asia, while Shanghai stocks headed for the longest rally since May as brokerages soared.

Speculation global policy makers will continue with unprecedented monetary easing helped the Standard & Poor’s 500 Index wipe out 2016 losses Friday, reversing the benchmark’s worst start to a year on record. Still, Goldman Sachs Group Inc. is holding fast to its bullish stance on the greenback, predicting stronger economic outcomes will force the Fed to raise borrowing costs three times this year, and the currency’s comeback is weighing on crude.

“A lot of the movement in oil recently has been dollar-driven,” Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney. “The oil market needs a stronger economic performance in order to spur demand and absorb all that oil supply.”

Commodities
WTI futures fell to $38.88 a barrel as of 12:55 p.m. Hong Kong time, after sliding 1.9 percent on Friday to trim their fifth straight weekly advance to 2.4 percent. Brent crude lost 0.8 percent to $40.89 after falling 0.8 percent at the end of last week.

Rigs targeting oil in U.S. fields rose by one to 387 last week, Baker Hughes Inc. said on its website Friday, the first increase of 2016. The prior week’s number was the lowest since December 2009. The greenback’s stabilization has also unsettled oil, which is priced in the U.S. currency, along with many other commodities.

Gold for immediate delivery declined a third straight day, losing 0.3 percent to $1,251.59 an ounce, while most industrial metals attempted a rebound, with copper rising 0.1 percent in London.

Wheat futures added 0.7 percent, rising for a second session. Weather across parts of the U.S. plains over the weekend was colder than expected, raising concerns that crops may be damaged, AgResource Co. said in a report on Sunday.

Stocks
The MSCI Asia Pacific excluding Japan Index slipped 0.1 percent, snapping a two-day climb as Australia’s S&P/ASX 200 Index lost 0.2 percent and the Kospi index in Seoul fell 0.2 percent. New Zealand’s S&P/NZX 50 Index added 0.3 percent.

“We’re not seeing a lot of enthusiasm in markets given the holiday-shortened week and the strong rally that we’ve had recently,” Michael McCarthy, chief market strategist at CMC Markets in Sydney, said by phone, referring to Easter holidays in a number of markets starting from Thursday. “We need to see more catalyst for this rally to continue. We need to see some signs growth is stable.”

In China, the Shanghai Composite Index rallied 1.8 percent in a seventh straight day of gains. Hong Kong’s Hang Seng China Enterprises Index, a gauge of mainland shares listed in the city, advanced 0.8 percent.

Margin Loans
Citic Securities Co. paced gains among brokerages after China Securities Finance Corp. said it will resume offering loans for as long as 182 days that brokerages can use to fund margin trading. Citic Securities surged 8.9 percent in Shanghai and Haitong Securities Co. jumped 6 percent.

“The correlation between margin lending and Chinese equities is highly correlated — this will be positive,” Evan Lucas, a markets strategist in Melbourne at IG Ltd., said in an e-mail to clients.

Commentary from some of China’s leaders at the weekend indicated senior policy makers are aware of and concerned about the surge in leverage there. People’s Bank of China Governor Zhou Xiaochuan and Vice Premier Zhang Gaoli indicated at the annual China Development Forum in Beijing that they think overall lending in Asia’s largest economy is too high, just days after the national legislature said their top priority was securing annual growth of at least 6.5 percent.

Futures on the S&P 500 were down 0.2 percent after the U.S. benchmark rose 0.4 percent on Friday, bringing its fifth straight weekly gain to 1.4 percent.

Currencies
The New Zealand dollar weakened 0.6 percent, while Canada’s currency was down 0.4 percent with the South African rand. The Australian dollar slipped 0.3 percent to 75.86 U.S. cents in the wake of its third straight weekly gain. The Korean won dropped 0.1 percent following a surge last week of 2.6 percent.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, added 0.1 percent after rallying 0.3 percent on Friday to pare its retreat for the week.

Odds the Fed will boost benchmark rates by the end of 2016 have receded to 68 percent, from 77 percent a week ago, with the central bank citing concern over the impact of global market turmoil on the U.S. economy in the decision to reduce its rate-hike ambitions. [Bloomberg]

FTSE 100 Outlook and Prediction

FTSE 100 Prediction
FTSE 100 Prediction

The usual pattern has been bull Monday, bear Tuesday and despite the drop off from 6238 on Friday, the 6155 has held well so far. The S&P is at a fairly key area at 2050 now, and the Fed are looking like doing less interest rate rises than previously inferred. So whilst there is a case for a push past 2050, at the same time, the run could be running out of steam at this fairly key area. For the FTSE today, I can see an initial rise to the pivot at 6195 area, where we also have a declining 30min coral line, though there is initial resistance at 6173 to start with. The 2 hour chart is also showing some bearishness with resistance at 6200 looking at the Hull moving averages, while we are still loitering in the middle ground on the daily Raffs. Bianca trend wise there is support at 6100ish, and resistance 6265, and not sure the bulls will be able to push it up 100 today but you never know! So fairly simple plan for today really, inverted V with a rise to and then a drop off from the 6195 area, possibly to dip down as far at 6105. If the bulls break 6200 though, then I expect a rise back towards 6250 and 6265. At the back of my mind I still have my wild 6350 thought!

62 Comments

  1. Morning all,theres the move I waited for on the Dax all Friday,thanks British Gas Cusomer service for the assistance with missing it and the btfd before it. 🙁

      1. Oh sorry WSF just realised you didn’t close…..was watching the chart …I think you will exceed that 10047 in any case ……a blessing in disguise…

        1. 🙂 got more left open on ASX from earlier than on the Dax and I still dont know why I have a Smart Meter and an estimated bill,just know they call rather than answer emails because they dont want to put it in writing.Fwiw I’m planning to go long CNA now regardless of nat gas movement.

  2. Morning all, licking my wounds from Scotland’s match! Hey ho, there is always next year!!!
    Just shorted a little bit at 95.

    1. Yes and you’ve got that Italian Job to look back on.Some of the reviews make it sound like it could have been a bit different if Scotland had kept all their players on the field.

  3. Morning all.
    Great first arrow Nick, dunno about the dip to 6105 though, that would mean the overbought DOW will run out of steam big style (which it can to 17400ish without breaking the daily uptrend).
    Dumped nearly all my early BTFD at 98, think there might be another pulse to 6220ish and then think about a short for a temp mid morning high.

  4. Morning All,

    Closed my remaining long on Friday for 40 points before close. Went long this morning again at 9900 didn’t expect a spike to 10K was thinking more of a slow move upwards but will take it. Took 130 points, more than happy to kick of the week. 10200 on the cards 10060-70 area should break.

    I’m looking for another long from 9980-75 area for a test of 10060. I doubt it will get to 9980 before 10060 lets see.

        1. Well it could be.
          I have two levels tmfp 665 on the Dow and 10092 (which is hit) and 10119 on the Dax which we might see and Dow should be 665. If it does its worth a short on the Dow as you mentioned. I’m not shorting the Dax though as I think it won’t pull back much.

          Dow is due a pullback atleast 200 points.

          1. Yes, trouble is with shorting the DOW is a potential exhaustion spike could take out anything smaller than a 200 pt stop if you went in in the low 17600’s.

          2. Hi RJ nice trades again,Dax has been lagging on the 200sma Day recapture so if the Dow stays up 10242 above yr Dec S 119 area seems doable at the moment to me.

          3. Thanks WSF. I didn’t expect to see Dax back in 900s so quickly. It is going to be range bound I reckon

    1. took a quick 8 on that, another bit to come? Still think 30ish will be enough for this morning.

  6. Drifting sideways to our uptrend line in high 90’s. A little long around here with a mid 80’s stop would seem reasonable.

  7. whats happened ?? Sticking to the plan, long again from 9989 – 50 point stop reduced stake normally equal to my 20 point stop. I think I have gone in a bit early thats why a wider stop.

    1. Dead quiet and drifting, I nearly went too soon but you’ll probably be alright, 9980=50% retrace.

        1. Brittle is the word 🙂
          I have a little half hearted FTSE long from 80, but not that enamoured by the action atm. While 9980 and 78 hold no great panic though.

          1. Now that we’ve finally scraped together a higher high, I’m going into protection mode on that long with a b/e stop.
            Basically, if we can’t build more on this anemic rally before the DOW and return to the lows instead, I think there’s a good chance of another leg lower.

          2. Missed 80 to close my short but popped stop in at b/e. I’m fancying a drifty period now until Dow-time. Again it seems range is tight (6150-6200ish) and no one likes being outside that. At some stage there will be a solid break out, we’ll have to see which way!
            I’m watching Dow vs Ftse closely (for me) and will short the difference at 11,600.

  8. How many fails over 200 now? Oh for my 14 short back….
    Is this shaping up for the DOW correction day?
    Or just another FD to B?

  10. Just had a Dr. Strangelove moment with my right hand and the sell button.
    Phoning my Bears Anon mentor now…..

  11. Not much economic data out for Northern hemisphere markets this week apart from UK CPI tomorrow and on Thursday EUR target LTRO,as far as I can see.

        1. Thanks yes, FOMC Bullard Thurs 12.15 too.Got rid of most of that ASX,keeping a bit for a Comms and AUD vs USD idea,probably wrong.but seems ok at he moment.Basically it’s buy the dip,but looking at more than one chart to feel better about not being short 🙂 Probably should just short USD in something tbh.

      1. Hi Si the only thing I can possible say is that at some point in the next few months I would have thought there’s a strong possibility the Dow will sell off to a level you can exit from with minimal loss or possible a decent profit…..You are going to have to play the waiting game…….if you are some crazy high Position size and you are stuck paying dividends I would try and find out when the 30 Dow company’s go ex divi and if you can get the dates you could……just an option…..you could hedge your position to negate the divi and if you trade we’ll make a profit……?You will need to learn to trade around your position in a hedging manner……If you carry on trading consider trading futures contracts……slightly bigger spread but you have no dividends to worry about if you are short?you can roll them to a longer term contract at reduced spread too if you have to hold a long time and there is no finance to pay..good luck…..oh and in future keep your position sizes smaller.very best of luck.

    3. Well, it closed at 17602 on Friday so probably about unchanged. I fancy a false move for the first half hour. A quick rally to 17650ish would maybe be a good short entry.
      Possible support around 17550. Not much of a D to B really though, 17400 has a nice sound to it.

        1. No worries….its a bit of fun and I can try and remember some of my old schoolboy German at the same time….if we do a German phrase a day it would be great…….makes a change from green and red candles and coloured wavy lines :0) good luck mate.

  14. Hang in there SI! Darkest hour before the dawn. I’ve no intention of being the fickle retail who capitulates under pressure. Pressure should have no bearing on the validity of a trade. The trade is either correct or it isnt. Whether you are right or wrong, just keep plugging away, improving and learning from every disaster!

    Question for you old hands. On my IG trading account app chart, what is the purpose of the tiny extra daily candle at the beginning of each week? It’s fairly important in that today it has shoved the current daily candle over very close to the steeply rising support trendline.

    On that matter, trying to be as objective as I can, price simply has to drop through that line at some point, especially with the upper line of the wedge bearing down on it.

  16. Has everyone gone to sleep? Have just had a big think (worrying) and have intiated plan – Short at 83, limit at 200 and 250 (can’t see it getting there but Nick’s dream of 350 a slight nagging doubt). Dunno what to call it yet.

    1. Remember the saying…..expect the unexpected…..it could fly past 200 very easily in my opinion…..its been in this 150. -200 range since the Dow was in the 400s.just my thoughts chippy,,,,could be very wrong…..that’s the disclaimer out of the way :0)

      1. Yep, got that anstel, hence the long FTSE vs short Dow comment above. In terms of expected vs unexpected I’m not really sure what to expect in the very short term! I sort of agree that it could fly past 200, but equally it seems to get a nosebleed at those heights and unless it can stick a good few closes above 6200 I still think it is “brittle” to coin tmfp’s phrase.

        1. So, having had a think (see earlier!) I’ve now gone and done some investigation – it appears, according to IG, that 80% of people with positions in Dow are short – no wonder it wont go down!

          1. 🙂 that would explain it.City seem to have stopped giving out their number,must not have liked people trading off it.

  17. Looks like I’m doing a WSF……been holding this Dax long for hours and it won’t yield anymore than +42 points……Expecting a call from British Gas but I will put it on answerphone after your tip this morning ……cheers for the heads up WSF

    1. 🙂 I’ve just been reading Mark Minervini’s new Blog Post ,”TIPS ON HOW TO TRADE AN EMERGING RALLY March 21, 2016″certainly doesnt seem to apply here tonight.

  18. Out of Dax for +28……… A profit is a profit………riveting stuff…..good night all.

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