Support 5981 5946 5942 5923 5890 Resistance 6010 6038 6080 6120

Good morning. The FT100 slipped for most of the day yesterday with broad based declines taking the markets to near three-week lows with weakness in the commodity sector triggered by continued concerns over the Chinese economy. Overnight negative news was that the People’s Bank of China set a weaker midpoint for the yuan (showing concern by the government over the Chines economy) and a survey showed that China’s services sector expanded at its slowest pace in 17 months in December An additonal global concern was the news that North Korea said it had successfully conducted a test of a nuclear device. All-in-all a negative day with the FT100 approaching the 6000 level before recovering late in the day. Was a bit early closing the 6121 short but such is life! Overnight more weakness from Chinese share sees the 7% circuit breakers tripping once again, so 5950 first thing this morning looks possible.

US & Asia Overnight from Bloomberg
Asian stocks tumbled, deepening a global rout, as a selloff in China triggered a trading halt in the nation’s equities for the second time this week amid growing concern over the economy.

The MSCI Asia Pacific Index fell 1.5 percent to 125.13 as of 11:07 a.m. in Tokyo. Turmoil has wiped more than $2 trillion from the value of global shares in 2016, the worst start to a year since 2000. Trading of Chinese stocks and index futures was halted by automatic circuit breakers after the CSI 300 Index plunged more than 7 percent following the People’s Bank of China’s weakening of the currency’s daily reference rate by the most since August.

“Markets are nervous — in essence they don’t trust the policymakers in China,” George Boubouras, chief investment officer at Contango Asset Management in Melbourne, said by phone. “Investors don’t like the concept of a fast-depreciating yuan, so there’s a lack of confidence. They’re exiting liquid markets in Hong Kong, Singapore and Australia as a proxy to lower their weightings in the region. We are positioned to be defensive.”

The offshore yuan traded in Hong Kong tumbled to a five-year low after China’s central bank reduced its daily reference rate. China’s increasing tolerance for a weaker yuan signaled authorities are struggling to shore up economic growth and rekindled concern last seen in August, when U.S. stocks entered their first correction in four years. The World Bank cut its global growth forecasts for this year and next as China’s slowdown prolongs a commodity slump and contractions endure in Brazil and Russia.

“It’s a bit of a fight of the officials versus the traders and where they think the currency should actually be,” Kerry Craig, global market strategist at JPMorgan Asset Management, told Bloomberg TV in Melbourne. “In the long run, this will lead to better transparency in the market, but in the near term it just adds to the volatility. We have to put up with that.”[Gap between onshore and offshore yuan widens to a record]
Gap between onshore and offshore yuan widens to a recordThe Hang Seng Index declined 2.8 percent and the Hang Seng China Enterprises Index retreated 4.1 percent to the lowest level since 2013. The CSI 300 of companies listed in Shanghai and Shenzhen fell as much as 7.2 percent before trading was suspended.

Under the mechanism which became effective Monday, a move of 5 percent in the CSI 300 triggers a 15-minute halt for stocks, options and index futures, while a move of 7 percent closes the market for the rest of the day.

Japan’s Topix index fell 1.6 percent as the yen climbed 0.4 percent to 118.06 per dollar. Australia’s S&P/ASX 200 Index lost 1.7 percent and New Zealand’s S&P/NZX 50 Index declined 0.7 percent. South Korea’s Kospi index slipped 1 percent and Singapore’s Straits Times Index dropped 1.8 percent, poised for the lowest close since 2012.

Futures on the Standard & Poor’s 500 Index retreated 1.1 percent after the underlying index fell 1.3 percent Wednesday to a three-month low and emerging-market shares dropped to the cheapest since 2009. Energy and raw-material companies led the selloff as Brent crude oil slumped below $35 a barrel to its lowest since 2004.

Minutes from the latest Federal Reserve policy meeting showed the committee decided unanimously three weeks ago to raise the benchmark federal funds rate by a quarter percentage point, ending an era of near-zero rates dating back to December 2008. The decision was a “close call” for some policy makers who worried about too-low inflation and received assurances that their colleagues would closely monitor its progress. [Bloomberg]

FTSE Outlook and Prediction

FTSE 100 Prediction
FTSE 100 Prediction

We’re doomed, we’re doomed! Or so you would think looking at the headlines. George Soros reckons we are on the cusp of another crisis (here), though there is some support at the 5945 area where we have the bottom of the 20 day Bianca and a fib pivot. I was also reading about this area being a key reversal area but that remains to be seen. With China tripping the circuit breakers again overnight after dropping 7% the bulls won’t have much momentum today. Maybe should have just kept that 6121 short from yesterday for a week!

The 10min chart has initial resistance at the 6002/6010 area so any early bounce might be worth a short at this level, though I don’t think we will be rising to the daily pivot at 6080 today. The markets are pretty jittery what with the volatile start and China dropping this week. If we do drop down to the 5945 area then I feel a little long here might be worth a go but its a bit risky as the downward momentum is quite strong at the moment. if this level breaks then I expect we will see 5890 in fairly short order. Its certainly tricky to call, bias is to the downside at the moment, but watch and see what 5945 does.

59 Comments

  2. Might not be the end of the world ,but it’s probably putting a decent dent in tmfp’s time off.

    1. Well now we know where he’s gone,it’s China,he’s probably shorted the A50 that Big he caused the drop!!!!

      1. Tell you what though WSF,I think we need some composure in these markets for everyone’s sake,People with index linked pensions are going to feel it.

        1. Yes anyone who has retired lately is living on less than they expected,must be a lot of people who could have had a lot more if they were 10 yrs older,but now never will – Of course that is only people who worked and payed for the system,not Govt Pensions.

          1. It’s not as bad as I figured – friend of mine finalised an annuity in the last couple of months at about 5.1% on his pot. (If I remember correctly – it wasn’t Index Linked)

          3. Good today if it isnt Fixed Term Hugh,closest I have to anything like that is trading HSBC and keeping the profit as shares 🙂 the div about covers my acct charges.Had a nice Endowment a while back,but had to sell it to some bloke who is no doubt praying I die soon.They actually checked with one of the two people you have to give details for when I was out of the country for a bit.Creepy.

  3. Morning All
    More for reference:
    RSI T here on FTSE Hourly – seldom happens – but if I’d bought each before when this happened – I’d be as happy as a pig in mud !

        1. Croma Security,actually didnt think there was a discount on the price,but noticed it was up a bit yesterday/today.It isnt very liquid but growing in a growth ind with profits and a div and wanted something that wasnt finance related.It’s been tipped in a few places due to the chart/growth,but I’m not in a hurry.Cant see Security not being in favour this year.

  5. Not alot going on – I’m still wondering if there is any merit to this chart.
    JPY/USD – FTSE (orange line) Comparative chart
    At the moment – simply using the MACD (on JPY) as FTSE bias.
    MACD+ – FTSE-

    http://imgur.com/fZDCRkO

        2. Thanks, 🙂 does seem like it might be worth watching for entries,hard not to count the waves their too.

  6. Morning all, got filled in the balance of my short last night at 5950, went long this morning at 5910. Limit purchases at 5850, 5800, 5700. Might need most of my ammunition as to be fair it still looks a bit iffy. Lets see how it goes.

    1. I don’t have Internet access down here in my bunker, I need to get a longer Ethernet cable.Is it safe to come out yet?

    1. Oh well it hasn’t yet maybe when it hits the 200sma on the 5min at around 68 ish,be interesting to see how it behaves.

  14. If it resumes upwards above 60 I might try another long,the A50 has just dropped back about 80pts on the 5 min chart

  16. If it can break the 200 SMA on the 5 min maybe it can ascend further is my guess,where’s Tmfp when you need him?

    1. Ummn not looking promising just yet,I think it will break the 200 though,just needs stronger momentum.

      1. Oh great ,WSF another survivor ,glad you made it through,not many of us left now :0) my long from 62 is turning blue.

        1. That push up on the Dow is nice,but dont really trust it with what they are saying they expect from China later.Ftse doesnt seem to trust it either,seems not to have moved with the last 50 Dow points.

  19. If it returns to a positive sentiment going into the close might gain a few points,don’t know.

    2. Hi – Always difficult for me in the afternoon !
      Anstel – That trade looks as sound as any could be – I’d be tempted to set your Stop (5933) and Limits (5997) & leave it to play out. You may get itchy fingers !

  20. Hi anstel I survived the apolcypse too, China has suspended the circuit breaker plan from tomorrow, so it will probably free fall for a bit then settle

    2. Bloody Hell Ravi I didn’t know they had suspended the circuit breaker,thanks for that mate,glad you survived too,I’m off back to the trenches to continue the battle.

      1. @WSF they’ll fudge something to prevent a collape

        @anstel no problem, I am bruised but not beaten, I should be able to recover from this quite easily but its hell annoying.

  21. The A50 is showing 9780 and it’s not making me feel exactly overconfident,if I can dump this long I’m going back in my bunker

  23. Travelling about a bit today, saw 50 points from my long this morning so took it. Think it might get back to 5900 again so limit in to replace there.
    I’m a bit ‘offline’ for the next week or so as only got my phone so posting is a bit tricky with these (very) old eyes! Good luck all, keep it tight an always take profits!!! Off to the bar now.

  24. Hi Chaps,well I thought I’d watch the open of the A50….it’s 1am.its hovering around 9720 to buy,if it maintains its composure we might hold above 5900 overnight.looking good up to now but it’s early days.GL all and good night.

  25. Well I couldn’t stay away from the screen,lol I was watching the A50 on the 5 min chart,it went up that strongly it went right off the chart,it showed a high of 9921 but it’s back down to 9760, so still none the wiser really but I’d say it’s looking pretty good on the whole.if anyone’s interested the FTSE is at 5945 to buy at 1.38 am. Definitely going to bed now.

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