Support 5928 5903 5871 5823 5818 Resistance 5946 5963 5976 6197

Good morning. The FT100 has now fallen for 8 days in a row so one would expect that there are fewer and fewer sellers remaining! At some point there will be a sharp rebound and perhaps Tuesday will be that day especially with out of hours FT100 moving to the upside. The FED could prove the turning point this week so the shorters could start to take profits this week before any announcements which could be the catalyst for a move higher. As oil and commodity prices continuing to fall the oil heavy FT100 is at 10-week lows. The FTSE 100 index was down 1.35% at 5874 at the close.

US & Asia Overnight from Bloomberg
Asian stocks fell amid concern over turbulence in the credit markets as the Federal Reserve prepares to raise U.S. interest rates. Energy shares rose for the first time in 10 days after crude oil rebounded.

The MSCI Asia Pacific Index fell 0.2 percent to 127.85 as of 9:11 a.m. in Tokyo, extending declines for a sixth day. Energy companies increased 0.1 percent after oil futures rallied 1.9 percent on Monday. The group had plunged 8.4 percent since Dec. 1 as crude reached the lowest levels since 2009.

A sense of unease prevails in global financial markets as the Fed starts its two-day policy meeting on Tuesday, with traders pricing in 76 percent odds that rates will be raised for the first time since 2006, ending the era of near-zero borrowing costs. Tightening policy would solidify the Fed’s divergence from other major central banks, with policy makers in Europe and Japan still emphasizing measures to support growth.

The prospect of more expensive cash in the U.S. and a deepening rout on commodities markets have helped erase $2.5 trillion from the value of global equities since Dec. 1. Bond market anxiety also has caught the notice of equity investors after Third Avenue Management froze redemptions at a high-yield mutual fund last week. Prices on U.S. high-yield bonds kept sinking Monday as London-based Lucidus Capital Partners became the latest fund to liquidate holdings as investors demanded their money back.

Regional Gauges
“There’s no chance in the world the Fed will hold off raising rates because of this credit-market turbulence,” Michael McCarthy, chief markets strategist in Sydney at CMC Markets, said by phone. “The collapse of junk-bond funds is not a sign that credit markets are about to freeze. It could lead up to a series of events, but in itself this is not a sign of systemic stress in credit markets.”

Japan’s Topix index dropped 0.1 percent. South Korea’s Kospi index increased 0.4 percent. Australia’s S&P/ASX 200 Index increased 0.2 percent, while New Zealand’s S&P/NZX 50 Index was little changed. Markets in China and Hong Kong have yet to start trading.

China’s stocks climbed the most in five weeks on Monday as miners rallied on the prospect of production cuts to bolster prices and data showed the world’s second-biggest economy is stabilizing. The Shanghai Composite Index advanced 2.5 percent.

E-mini futures on the Standard & Poor’s 500 Index climbed 0.3 percent after the underlying measure rose 0.5 percent on Monday, surging in the final minutes of trading as a rebound in U.S. crude oil to back above $36 a barrel overshadowed credit-market turbulence and weakness in commodity shares before the Fed meeting. [Bloomberg]

FTSE Outlook and Prediction

FTSE 100 Prediction
FTSE 100 Prediction

5928 is looking like a fairly key area to start this morning off and a break below this will likely lead to S1 at 5881 and possibly the bottom of that 10min channel at 5860. To start with we have pretty decent 10 minute channel in play with resistance around the daily pivot area at 5950 and this looks like it is worth a short. The bottom of that channel is at 5860 and I am not sure it will get that low, having rebounded strongly overnight from this level already. However, if it does then a double bottom bounce could well be worth a go. It will also be worth trading breakouts of these levels today as its been pretty volatile recently, and a move above 5950 is likely going to try for the top of the 30min channel at 5980. Above this then 6000+ looks likely. My 2 hour chart is showing some bullishness but the bulls really need to start showing some strength to reverse these days of declines as every rise has been rebuffed. They are mostly waiting for the Fed tomorrow of course and a favourable outcome of that for the markets will then likely see 8 days of gains, reversing all this bearishness. We shall see! So in summary weak bull at 5930, better bull at 5870, bearish at 5950 and 5980.

86 Comments

  1. Morning.
    We got our 100 point bounce, now they have to make it stick.
    December’s 1 hr downtrend is around Nick’s 5980 resistance too, so that should be the first bull test, then 6010, as well as 10400 on the DAX.
    Have we seen the bottom?
    With the Fed at 2pm tomorrow and $1 trillion’s worth of S&P options, 2:1 puts, expiring on Friday, we could be back there in a matter of HFT minutes.
    Buying the dips here, currently long at 50 (after giving away a 21 early long for +7 🙁 ), coming out now at 75 as we kiss the downtrend line.

      1. Good luck, I have a little there too, would like to see 66 go soon, but I think downside is limited this morning.
        DOW will be interesting, running into resistance around 17500 (50% r/t).
        I’m still laughing at that algo nonsense yesterday.

        Correction: Fed Rate announcement 19.00 tomorrow I think?

    1. Weekly?
      No a bad punt. Have a look at the VIX, it’s sort of an options option.
      I shorted at 23.00 Dec yesterday now 21.58 🙂

        1. Ah ok, if it’s going to hit the money it will probably be this week what with the holidays anyway.
          GL as ever.

  3. Cool trade from pivot missed due to school activity. Only managed to skim 5 points on the top. I wish it retraced but I think it will be a long wait. So I am not rushing into this long right now, although a pity I am not in yet. Retrace to 10270 would be welcomed of course.

  4. We’re looking strong comparative to the DAX. The chances of an upside break out, maybe not this time, are increasing so looking to buy a pullback to 60’s 10pt stop.

          5. Still hanging in there Senu?
            Just missed your stop so far, good luck, DAX needs to break 370, get down you Germans!

  5. Morning all, been “out of circulation” for a few days for one reason or another and looks like I’ve missed a load of fun. This Santa slap a bit more agressive than I’d hoped! Anyway, still “long and wrong” (by just over 150), not so convinced about the 6450 year end but think 6300 is do-able (and target).
    Cheers

      1. Yep, tmfp, I saw that! On the plus side, the chart thingy that IG do each morning have finally started headlining “The Downside prevails”! On the basis that I nearly wet myself being short at 6440 no more than a couple of weeks ago I should be comfy being long where I am. That is what makes a market!

  6. “They are mostly waiting for the Fed tomorrow of course and a favourable outcome of that for the markets will then likely see 8 days of gains”

    You seem so sure. If we had eight days of gain then I am sure we will get to 6400 by year end, if not more. Sentiments can change quite quickly on a short term basis, so even though we’ve had lots of bearishness over the last two weeks I think it is possible positive mood can come in still for the remainder of the year.

    As for Fed, I don’t know what to make of it. The markets have already priced in an increase, which I think we will almost certainly get, but I think they would also likely to hear the Fed will be accommodating, in that they will not rush into future hikes over coming months if economy shows weakness. But it’s amazing how markets can always put a positive or negative spin on something already so predictable. I find it funny how the CBS Marketwatch “experts” always seem to get their market predictions wrong but ways have an explanation with hindsight.

  8. FTSE 100 (Daily)
    The FTSE 100 traded below 6330 which led to a follow through to retest lower levels. Now that we have broken below 6079 the most likely scenario is to see the 6000 level being tested but probably 5933 as the main objective. The technical MACD is on the lower side indicating weakness and so any rallies from this point could offer opportunities to trade from the short side. A bullish move will require the index to trade above 6175 with a sustained close above this level for three days. Failure to do so keeps this index firmly on the bearish side for now.
    Hope you all find it useful.
    http://www.fxblue.com/users/goldsignal

    1. Yes the Friday options expiry will magnify the Fed effect.
      Matey in the article is long $43 million in calls, but there are $215 Billion in puts struck between 1900 and 2050, out of a total of $670 Billion! Eyewatering…..
      If the Fed effect is initially bearish, it could then trigger that exposure being hedged by HFT’s selling the index.
      Massive downside potential.

          1. reminds me of when you open a S/B acct and they say,all seriously,that lots of people use them to hedge their Portfolios and then act surprised if you think thats funny 🙂

  10. Technical outlook: FTSE
    http://www.fxblue.com/users/goldsignal/profile

    On Monday the FTSE dipped to the key support zone in the range between 5870 and 5920. This area had previously been support and corresponds with the 78.6% Fibonacci retracement against the bounce from August. At this stage however it is not clear if a base has been formed, given that the index was looking oversold anyway and short-side traders were likely to book some profit ahead of this week’s key fundamental event (i.e. Federal Reserve rate decision). The index still needs to clear key short-term resistance around the 6000-10 range if we are to see a more pronounced rally later this afternoon or tomorrow. Failure to do so would mean a small oversold bounce, potentially leading to another significant drop. But if does clear this resistance range, then there is little further short-term resistance until the 6200/20 range. This is also roughly where a bearish trend line that has been in place since April comes in to play. Thus a potential break above this key area could lead to an eventual rally, which could see the index climb all the way to the 200-day moving average at 6575 or the long-term 61.8% Fibonacci level at 6605/10.

    http://www.forex.com/uk/post?SDN=004e023b-2cf2-4fd7-a8d4-1776ab88d54f&Pa=20db1fa6-e674-420c-9a87-2ee29261d638

    1. That trend line is done in hindsight. I don’t think 6200 represents a big resistance in the greater scheme of things. The FTSE was trading at 6440 only a couple of weeks ago. And the Dow has been tad short of all time highs even as recently as two/three weeks ago when it tested 17900 a few times.

  12. It was crap. I took half on my long dax, but when I was trying to add I accidentally pressed Wall Street and it was crashing. I still added to Dax and waited for it to come to a bit of a profit and closed Dax, then added 1/2 to Dow to help to survive, I closed it -8. Basically it wiped out my first half of the long trade on Dax and I came to +15 points profit of the day (av. max stake). But never mind, sh.t happens.

    1. It all put me off, I should have held that trade on Dow ideally. But I was upset by my mistake. I should have never gone long Dow at 12.42

      1. Now I missed the Dax trade. Frustrated. I cannot enter now again. Corked it up again. Never have patience.

  13. DOW soon then, DAX broken out and attempting the 450 level where it failed yesterday morning and we’re looking reasonably positive at 77.
    Although it’s early days, we have broken our downtrend and also bounced of it as support at 65, so still mildly bullish for a go at 6010.

    Opening around 17470/500 DOW will be hitting on the December downtrend and ~50% r/t of the fall from last Thursday.
    No strong feelings either way, although I’d probably look for an early rally to run out of puff for a short and subsequent dip buy.

      1. Up to you really mate it could work, but out of money options are cheap for a reason i.e. they usually lapse.
        A cheap way of getting exposure should it go crazy bear, though you’ll need a >3% move.

        1. Mostly on here Jack, that’s why you have loads to scroll through 🙂
          I used to keep a trading diary and still have some basic “rules” written down, where I keep a score of the times and consequences of breaking them.

          1. I have my diary, I read it in the evening a lot. Generally I am improving my strategy and write rules and encouragements. It does help to get my head round. 🙂

  15. That’s how I got 20 points on double stake on Dow… in 4 minutes. Yep. 17541, 17535 longs to target 60. Having missed the good entry so now it’s at least some consolation. +45 points today and now off. If you don’t have a good entry don’t chase it, it’s my rule.

  16. It could be a Christmas rally. I see RJ’s trio formation on Daily. If you see this, could you have a look, am I right?

      1. Hi Jack,

        It is not a very clear signal. I didn’t trade today as was busy with work. Having a look at the charts I see more downside tomorrow no plans as such will take a look tomorrow morning.

  18. I have a feeling we could be in for a bit of a barnstorming close today, a bit early just yet, but I’ll be looking to buy a dip in the next half hour.

  21. How do you rollover quarterly contracts? I forgot to auto rollover when I created the trade? It has this option open but doesn’t save when I click on it.

    1. You should be able to select auto rollover even after you’ve opened the trade. Maybe call your broker up. Who are you with?

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