Support 5800 5792 5770 5740 5713 5687 Resistance 5841 5855 5863 5882 5891 5927 5980 6009

Good morning.
Market Summary for Friday
When it appeared the markets were stabilising and we were building towards a test of 6000 on the FT100, Friday comes along and destroys the consolidation of the previous days!
Oil plummeted again and was the main driver of the market move, breaking down below the $30 barrel level. BHP caused the trigger for a very negative open by writing down its shale assets by a few billion and this had knock on effects to other commodity shares. Iran sanctions have been lifted over the weekend and likely to add an extra 500,000 bpd which could lead to a further weakening in the oil price.
Shares slipped for most of the day however did stabilise on the Wall Street open to close near the 5800 level. This level has not been seen since November 2012 so over 3 years of gains have been wiped out by the current correction. Fortunately, the lower support level at 5740 that I mentioned held well (5936 was the low) and we have a seen decent and sustained bounce from this level. Too early to say if its “the” low but its looking like its generated some buying activity.

US & Asia Overnight from Bloomberg
Nikkei 225, S&P/ASX 200 indexes down 19% from 2015 peaks
Oil price below $30 a barrel for first time in 12 years
Asian stocks slumped, with Japanese and Australian shares on the cusp of joining China in a bear market, as concern grew over the strength of the global economy amid a continuing collapse in oil prices.

The MSCI Asia Pacific Index lost 1 percent to 118.94 as of 11:10 a.m. in Tokyo, extending this year’s slide to 9.9 percent. Japan’s Nikkei 225 Stock Average declined 1.4 percent after plunging as much as 2.8 percent in early trading. The gauge is down 19 percent from a June peak. A drop of more than 20 percent at the close would meet the definition of a bear market. Australia’s S&P/ASX 200 Index slipped 0.7 percent, and is currently down 19 percent from an April high.

Oil is below $30 a barrel for the first time in 12 years as global growth worries roil equity, bond and currency markets. Investors awaited 2015 gross domestic product estimates from China on Tuesday as it struggles to boost a slowing economy and money managers debate how many times the Federal Reserve will raise interest rates this year.

“Worries about China, the Fed and global growth are likely to drive continued share market weakness and volatility in the short term,” said Shane Oliver, head of investment strategy in Sydney at AMP Capital Investors Ltd., which oversees about $115 billion. “Expect volatility to remain high.”

Traders have been whipsawed in 2016, with equities around the world off to their worst start to a year on record as oil plummeted to levels last seen more than a decade ago and China struggled to maintain control over its markets.

The Shanghai Composite Index entered a bear market last week, for the second time in seven months, amid persistent investor concern over volatility. China’s stock-market watchdog has acknowledged ineptitude and loopholes within its regulatory system after a review of the turmoil that has rocked local markets since June.

The measure rose 0.2 percent Monday as China’s central bank strengthened its daily reference rate for the yuan by 0.07 percent, the biggest gain in four weeks. The People’s Bank of China will impose reserve-requirement ratios on yuan deposits held on the mainland by offshore participant banks from Jan. 25, according to people familiar with the matter. Premier Li Keqiang on Friday pledged a “stable” exchange rate, and said the nation has no intention of stimulating exports through competitive currency devaluation.

The MSCI Asia Pacific Index has been in a bear market since August, as global equities plummeted after China devalued the yuan. The gauge is trading at the lowest level since 2012.

Japan’s Topix fell 1.3 percent on Monday, bringing its losses from an August high to 18 percent. Hong Kong’s Hang Seng Index retreated 0.9 percent, extending a three-year low, and South Korea’s Kospi index dropped 0.2 percent. Singapore’s Straits Times Index lost 1.3 percent. The market is one of the worst global performers over the past year, with the benchmark gauge down more than 25 percent from a peak.

New Zealand’s S&P/NZX 50 Index slid 1.5 percent. Australia’s ASX 200 pared earlier losses as Woolworths Ltd. surged 4.8 percent after saying it’s exiting Masters — its unprofitable Australian home-improvements joint venture with Lowe’s Cos.

Both U.S. crude and Brent settled below $30 a barrel at the end of last week and the Standard & Poor’s 500 Index sank 2.2 percent Friday. Brent oil briefly dropped below $28 a barrel on Monday after international sanctions on Iran were lifted, paving the way for increased exports from the OPEC producer amid a global glut.

Futures on the S&P 500 rose 0.2 percent. U.S. markets are closed Monday for a holiday.

The U.S. economy is weaker than expected though probably not headed for recession in 2016, Mohamed A. El-Erian said in an interview on Fox News.

“We are experiencing a lot of volatility. Growth and wages are lower than where we could’ve been, but let’s not forget it’s an economy that creates a lot of jobs,” Allianz SE’s chief economic adviser said. [Bloomberg]

FTSE Outlook and Prediction

FTSE 100 Prediction
FTSE 100 Prediction

The US markets are closed today for Martin Luther King day, and “normally” you would expect a fairly flat day. However, with the volatility the way it’s been we will probably get a 100 point range today! We tested the 5740 level on Sunday night out of hours open, and again have bounced back and are just nudging above 5800 as I am writing this. I expect that the rise will continue first thing as the 10min and 30min chart do have bullish moving averages, with support around the 5810 area on both. The daily pivot is 5841 and I expect this will be the first test of the bulls momentum and we may well get a bit of a dip from here if we get the early rise. Above this then 5865 is the 100 Hull moving average resistance on the 2 hour chart – so later on this might have moved down to 5860ish, so a short from around this area could be worth doing, for a pullback to 5800ish. If the bulls manages to break that 5860 area then the top of the 10 day Bianca is 5927. I am actually feeling fairly optimistic now we have twice tested the 5740 level and bounced up, and I feel that buying the dips is wise for the rest of January. If 5740 breaks though then I accept I am wrong and we have further downside sub 5700.

85 Comments

  1. Good call Nick, have taken the long to 5845 now short looking for 5805 and then long again later looking for 5850. Going to buy the dips and sell the gains.

  2. Morning all, looks like you’ve been having fun while I’ve been sunbathing 🙂
    Kicking myself for not putting my money where my mouth was last night and longing at 5760, but picked up an rsi short this morning at 50 on that nice exhaustion candle at 0829, taken half out and running the rest b/e stop.
    Don’t know what to expect with the US shut today, a quietish afternoon probably, good for getting my feet back under the table after all that choppiness.
    Good call at 92 Nick, I’d think that’ll hold today too, if it doesn’t then a brave buy in the mid/low 5700s with a 50+ stop might be good.
    Sold my VIX long for a humongous +, a short around 28/30 would be a good alternative to an index long if we sell off hard.

  3. All going to your arrows so far Nick. Good call. About to switch long for rest of the day. Going long on Dax. Can see 100 points gain by mid afternoon.

    1. Just noticed something to be aware of…….the Ftse hit above 50 earlier……on my uk 100 cfd tab on city it shows a high of 5824 ???? What’s all that about ,computer error I suppose.

      1. Got that with the Dax,too.Last week no problems,then they are down all weekend working on their system and now it is back giving wrong info and slippage.I suppose they fixed whatever the problem was last week.

        1. I’d like to mention something else WSF,I have noticed that when the market starts moving very often after a period of relative stability flash player crashes and I have to reload the whole platform.it only seems to happen when things are moving? I Have an iPad on the app and iPhone as well all logged in and ready if I need them but I lose at the charts and it’s like going blind without the full advantage web up an running.

          1. Yes,they’ll just say you should download MT4 or the other thing,although if it was your system that was wrong that wouldnt solve it,all you can do is run as few things as possible I think.I had lots of time lag this morning,logged in and out a few times already and cut my watchlist to 3,seems to be ok at the moment.The way you react to it probably does more damage than the problems,so it is just one of those errors that always work against you like with Bank charges,random computer errors that always benefit the bank.

    2. Hey anstel, what you doing buying in the middle of nowhere?
      I’m not getting on your back (again) but what was the motivation, technical, a hunch, or what?
      You’re worrying me, this market could eat you alive unless you sharpen up your entries, my friend.

        1. Not the point young man, you’ve already survived nearly -50 on it.
          Go long short whatever, but be careful ffs.

          1. I just wanted to add why I did it tmfp.i thought there was some pressure building up for some momentum upwards,I tend to try and feel what the market is doing and I view the ups and downs as kind off pressure waves if you like,it did actually jump up 8 points very quickly but I’m too slow closing again.

          3. LOL 🙂 tmfp – see you go off on holiday for a couple of weeks – only to come back to find wild trading & havoc !

          4. A constructive suggestion for entry possibilities:
            get up a 3 min stochastic rsi 14/14/3/3 and a 10 rsi, just paper trade the 100/00 stochastic and 80/<20 rsi combinations, a good way to see limited risk opening opportunities.

          5. I have had the Rsi set up as you suggested to me a while ago RSI 10 80/20 it’s very very good,I have no experience with stochastics so I will go and do some homework on that now 100/00 thanks.

  5. Both DAX and FTSE running out of steam around 50% retrace of the morning’s drop here.
    Short at 12 15 either way

    1. Took 15 and looking for a long around 90.
      If it bounces off low 90’s then that 0940 to 0950 dip below 90 and quick recovery is a bull sign for me.

  6. Morning Guys,
    Welcome back Tmfp – hope you had a good break.

    School run for me today so missed the early morning action .
    Turn up for the books – a trade that returned some + !
    Went Long 6778
    – RSI Trio – RSI 14 <30 – Waited until the HA Candle went green . Came out 5801 – to early perhaps – I wanted to put in b/e stop and thought to myself "Sod it – don't want this to close for "nought" – may as well take it. (My target was roughly 6814 ).
    3:1 – PRT Line as well.
    You can tell I'm trying to work on my "mind set" 🙂

    http://ee.md.it-finance.com/ProRealTime_V10_2/display_chartimage.phtml?name=2hmi4cw9bfg1f9d9ojyqboyl6&type=png&purpose=file

    1. Thanks Hugh, yes, very pleasant I like the Med life style in the winter with no tourists.
      Working on your mindset eh? Very laudable.
      Same here, trying to transition from pure scalping which has served me very well (and I will continue with) to longer term trading, but I’m afraid that when I see a profit it’s very hard to refuse.
      As I was lecturing 🙂 anstel about, entry is the most important aspect of trading profitably, get that right more often than not and the rest is the luxury of taking whatever profit you deem appropriate.

    1. That’s good 🙂
      There was a good short in the 30’s there for a scalp, covered at 13 as the 1 min uptrend from the low is hit, and a long at 15, 15 either way.

          1. tmfp can I just check something please,when you say covered am I right in thinking it means brought your stop to b/e or if it’s say 10 pts In profit up behind the profit to lock the profit in,Meaning covering your risk,I have always presumed that’s what it meant but no harm in asking?

          2. Oh I get it now short in the 30s down to that level at 13,it’s like reading music the way you do it! That’s amazing but I see what you mean exactly now,I’m going to watch and see how it responds .thank you!

          3. I usually mean closed a short when I say “covered”.
            Don’t really know why come to think of it, always have.

      1. Well I looked across the bottom of the one min and picked 95 as the low even though it did spike a bit lower then when it seemed to gather abit of upward momentum I bought at 99 then drew a line across higher up to the next Support /resistance and figure it’s about roughly 07. First target.

          3. Just a micro lesson about good entry here: I just took 10 profit by letting the market come to me. You are only +2 because you didn’t. I longed simply because of an indicator, you longed because you had a bull plan.
            If it dips again to 92 I have the choice of using that +10 for a cost free re-long, whereas you will be looking at increasing a position which is showing a loss.

            Re the DAX, you are predicting a pattern will change i.e. it will start making higher highs by breaking out above 9560.
            Why not wait till it does and then buy it? You would have momentum and clear air till 600ish then.
            This is the crucial difference between predictive and reactive trading.

          4. Thanks tmfp kind of one answer covers it,I think when you went long I waited till it started to gain momentum,I was wrong you were right but I did what you suggested about the Dax wait till it turns and then buy it,I just waited to long though,it’s the little split seconds that can make quite a difference,I’ll keep practising.

          1. Nothing really Hugh, it’s just after lunch and there’s no US for the usual afternoon direction.
            Maybe a half hearted rally followed by a closing self off?
            Just sort of made a higher high, and 5760’s are August cash lows too, so I’d be surprised if anyone took it on themselves to heavily short near there today.
            Just broken the downtrend from 11.00 too.
            Maybe 800…rather long than short for a few from here (80) I think.

    1. I think there’s a 200/300 point bounce coming up, but wouldn’t discount a further sharp sell off first.
      So, in answer to your question, don’t know. 🙂

      1. Afternoon all, been out of contact but having a couple of cheeky punts via the magic of mobile app. I agree with tmfp and will start a “loading” process from 6750 and down. I think we’ll see 6000 before we see 5500. Actually, sod it, long a bit at 5790.

        1. By “sharp sell off” I was meaning maybe 5400 🙂
          I don’t expect to win my 5200 bet before autumn though.

    2. I think I’ll stay out for now. 5800 seems neither here nor there. It could potentially go either way, I think I’ll wait for when the conditions are more favourable. By the way, in financial spread trading, who wins off whom? Do winning clients make money from losing clients, or do they win directly off the firms. But I suppose the firms make their money from the losing clients in order to pay for winning trades. Is this about right?

  11. Well, the MHH coming up.
    Still feels like it has a bit of upside to come, especially if the DAX can make a new high >65 and trundle on towards 9600 and take us over 800 which depending, could be worth a closing short.

      2. Just hold it Anstel. The market will rise above that level this evening. Might be worth keeping it for tomorrow

        1. Oh don’t worry I’m holding it alright,got to be careful later Argyle though,got that Chinese data out later it’s going to get choppy.

          1. Oh sorry Argyle it looks like it has posted about the Chinese data earlier.it wouldn’t let me post it,and said duplicate comment detected,it wasn’t there when I looked now it’s turned up.

    1. 2am though regardless, Dax could have another go at 80 or even 50 before then,been true to its trend for the last 15mins.

      1. What has me concerned is that almost 300 point jump on the A50 first thing this morning,it could,not saying it will,be going up and down 300 pts which is going to be unsettling till we see which ways it wants to go.

    1. Yeah probably but anything can happen in this game.my Guess is it will dip quite a bit like NFP and then get composure and go up,problem is its just a guess.It all looks reasonable value but it depends how the Dow reacts and the Dow is anything but predictable as we have all seen.

  15. The Dow is where it was Friday and Europe is a bit below where it was.Think it will take News before the people starting the rallies in low volume stop selling into them or before anyone else starts buying.Oil is below 29 at the moment.

  16. Hi WSF yeah the Dow closed at 15999 -16003 on Friday but it had dropped as low as about 15850 ish from memory,I know it was about 100 pts above the 200 at 15751.it wouldn’t surprise me if it dropped to the 900s just before 2 am.If oil is below 29 it could very well dip but my guess is it will go up when everyone calms down.i hope it goes up for everybody’s sake.

  17. Anstel, stop worrying about 2 am. It may jump around a little but just sit on it. Nick suggests you buy the dips because he feels in the short term the bottom has been reached.

    1. I’m not worried Argyle just chatting on here about what I find interesting.i don’t watch tv it’s garbage so I like to see how the market reacts to things for potential future reference,and if anyone’s interested on here that’s a bonus.No worries,if I was any more chilled out I’d be dead !!!! It will be nice when spring gets here and we get some lighter nights though to go out and do stuff.

      1. Mkt wise it’s still only a correction,every commentator is saying a bounce is due,City says Client net exposure is 86% long Ftse,76% long Dow and 68% long S&P,maybe the bottom wasnt Sunday night.The US attitude to Chinese numbers is typical,so if they beat estimates by the usual margin it might be discounted anyway.The Dax set its range before 10 this morning and is in the bottom 3rd of it now,hardly visited the top half all day,maybe nobody needs a rally to get out of anything,maybe they dumped it all last week before the holiday and it will just drift down a bit more.

        1. Ftse and Dax resistance at R1 so far as everyone struggles to get excited about numbers that are only slightly worse than forecast 🙂

  18. Morning – If it gets to 5906 may be worth a look for a bit of reflection lower…
    PRT and couple of other signals firing off here 5900

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