Support 5851 5822 5805 5772 5750 Resistance 5895 5901 5907 5949 5963

Good morning. The pattern for yesterday was similar to Friday with a strong start, retrace back down, rally towards the US open then an aggressive decline into the close which was approximately 5872. It shows there are many professionals who are happy to sell into any rally and with novices usually trading at the open this pattern confirmed the negative tone to the markets. At some point this pattern will be broken however it will need a big injection of good news to do it. We did see a decent bounce off the double bottom low at 5840 later in the evening, and sometimes the Monday before option expiry can mark the low point – we will need to see if we get much of a rise during the rest oft he week to see if thats the case this time.

US & Asia Overnight from Bloomberg
Emerging-market stocks retreated to the lowest in more than six years and currencies weakened as concern that China’s growth outlook is worsening and a commodity slump pushed investors away of riskier assets.

All 10 industry groups in the MSCI Emerging Markets Index fell as a gauge of energy companies fell to the lowest since September 2004. Philippine shares entered a bear market as Chinese equities on the mainland and in Hong Kong led a rout in Asia. The dollar-denominated RTS Index of Russian stocks plunged 5.1 percent as Brent crude sold for less than $32 a barrel. The ruble fell to its weakest ever against the dollar as trading resumed following a two-day holiday. A gauge of developing-nation exchange rates declined for a seventh day to a record low.

Volatility in Chinese markets has sapped risk appetite globally as extreme swings in local assets rekindle concern about the government’s ability to manage an economy forecast to grow at the weakest pace since 1990. Data over the weekend showed consumer inflation remained at about half the official target while producer prices fell for a 46th month, fueling speculation that the slowdown is deepening.

“The weakness in both the A-share market and the oil price would be the two lead indicators today,” said Tony Hann, the head of emerging equities at Blackfriars Asset Management Ltd. in London, referring to stocks traded on exchanges in mainland China. “Both are perceived as symptoms of weak growth,” said Hann, who is avoiding energy stocks in favor of consumer-oriented assets.

Valuation Discount
The MSCI Emerging Markets Index decreased 2.3 percent to 723.36, dragging the average valuation of its member stocks to 10.3 times projected 12-month earnings, the lowest in more than four months. That represents a 30 percent discount to the MSCI World Index of advanced-nation shares. [Bloomberg]

FTSE Outlook and Prediction

FTSE 100 Prediction
FTSE 100 Prediction

We had a very good bounce off the double bottom low at 5840 last night, and the usual overnight declines haven’t been as steep as they have been so far this year. As such, if we test 5850ish then I think that this is worth a long around here for a run to 5900+. Initially the 10 and 30min charts are showing as bearish, but with resistance on both around the 5900 level so this is the key level for the bulls to break this morning. Interesting article from Goldman Sacs here – the others are all in panic mode (RBS said sell everything yesterday for example). If 5850 breaks then the bottom of the 20 day Bianca is 5822 so we will more than likely see that level (we also have the 20 day Raff at 5813) so it might be worth starting to think about fading in some swing longs around this level. Below that then 5750 is the bottom of the current 10 min channel. The bulls do have a bit of a job on their hands though as the top of the 10 day Raff is at 5915ish, hence the profit taking on that rally last night. I am thinking that 5850 is likely to hold this morning.

47 Comments

    1. Morning All,
      It looks like we’ve recovered the Pivot point 5895-
      Would have thought there were a few Stops around here – might this take us a little higher.
      RSI on the 1 min is 70.
      I think we could drift a tadge higher to >5920 to 5925 & may be worth looking for a Short there.

    1. Coombsy – Been stopped out of my S. Looking next at about 5941.
      If the CAC gets to 4438 (currently 4400) – I might look at that as well.

      1. 5942 here we are. You brave enough to short yet or do you think it’s going higher. Oversold on stochastic and RSI. But it’s looking like it’s staying that way.

        1. Coombsy – Went in S 6941 – PRT OL – Stopped out for 10.
          There’s Top somewhere around here – just a case of finding it.
          I have an RSI T as mentioned below 5957 – normally stick a few on so looking at S 5967 & now that doesn’t look like it’s going to fill.

  9. Good Morning All,

    First trade of the day – Dax Short 10072 – 12 point stop.

    Having missed the long trade I should have taken at 845 it was a long wait.

        1. Great job, I had the same trade but closed for 20 points without hesitation, it’s a counter trend and lack of time.

          2. Thanks Hugh I think this may drop under 5900,I had a great day Yday did approx 30 trades on Dax and won them all for a change,targeting between 10 and 20 points on each,it’s adds up nicely but minimises the risk,I really enjoyed it but had no time to post.GL hugh and all.

          5. 5927 – just picked it as a 61.8 retracement.
            Glad you had a good day yesterday & know what you mean about posting – can be a distraction..

  14. I look at the Cam levels and it is frustrating when these would have given a great trade. Today’s was Cam Level Break Out L 5910 with good R 1 – 2- 3 Targets above.
    Ho Hum

      1. Coomsby, history of last few days, oil down, lack of investor confidence, risen too far and too fast this morning, big sell off before close due to overnight worries about China, need I go on. Can see 5800 on cards this week. When it does then a long would be in order, but not from here.

        1. Am I right in saying you place more emphasis towards the fundamentals of the economy and markets for your trades rather than being a technical trader. Or do you do the numbers too?

          1. Not too technical, I guess quite a lot as well. Just see this going back to where it started. Times are a little strange at the moment. I’m sure FTSE will be over 6000 again this month but not this week

  18. Morning all, haven’t had the chance to post on here recently, although I’ve been reading everyone’s interesting posts.

    I see the Dax is back above 10,000, didn’t think I’d see that for a while. Maybe the FTSE will challenge 6,000 later today? Oil – seems they can’t give it away, Brent at 3150! When it gets so unbelievably low it always means it’s got further to go.

    Got stopped out at breakeven on my FTSE trade from 5880 yesterday. Looks like I was a day early on that one. Equity wise I’m doing well, closed a short on Sports Direct for 149 points, now I’m long on LAND from 1114. Also gone long on WPCT from 96 which was a discount to NAV at the time but is now a premium. I’m torn whether to hold this for weeks and months or take a quick profit.

    Anyone got any year end FTSE predictions? I’m gonna go 6700.

    1. Hi Dan,
      Not to sure what to think of WPCT. Would have thought it was in capable hands.
      I know this seems a little off the wall but I’m just looking at RDSB. Sure it moves in waves in line with Crude (CL) but wondering if this is due a bounce as there is the vote on BG which doesn’t look that hopeful (27th Jan), the ExD is coming up in Feb. and finally as I mentioned – due a bounce maybe to fill the small gap created on 7th Jan to 1484p – a 10% rise.
      The previous waves have been
      -12.5% then up 8.7%
      -16.41% then up 11.11%
      This current one down 15.43%
      – possible bounce to 1484p +10.6%.
      Mind – not the best candle today 12/1/16

  19. I shall trade long in the morning and then at 3.30 I shall trade short till 4.45. Seems to work every day at the moment.

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