Support 6027 5997 5993 5992 5935 5929 Resistance 6112 6135 6182 6191 6230

Good morning. The FT100 managed to break the run of 8 losing days in a row with a sharp recovery taking it back above the 6000 level. It is unclear whether this is just short covering before the FED meeting later (7pm UK) or genuine buyers coming back in the market. Today will probably be a “wait and see” day with any action after hours this evening and Thursday. The hope is that the buyers return and a “Santa” rally materialises on Thursday, however the markets like to shake out weak long positions so could still throw in a spike down to clear a few tight stops. Either way we should see a fairly big range today.

Most sectors moved to the upside with supermarkets among the best leaders on positive analysis of Sainsbury which also pulled up Tesco and Morrison. Housebuilders also had good gains but commodity shares still were some of the weakest which shows the rally is still not secure as this sector would be expected to improve on a better economic outlook.

US & Asia Overnight from Bloomberg
Asian stocks rose, following a rally in U.S. shares, as crude oil prices jumped and investors awaited the Federal Reserve’s first interest rate increase in almost a decade.

The MSCI Asia Pacific Index rose 1.3 percent to 128.31 as of 9:05 a.m. in Tokyo, its first advance in seven days. The gauge lost more than 4 percent in the previous six sessions, reaching the lowest level since Oct. 2. The Standard & Poor’s 500 Index capped its first back-to-back gains in more than a month as energy companies led a rally with crude oil.

Investors are shrugging off concerns over commodities and junk bond markets to focus on the Fed’s policy decision due in less than 24 hours, with traders pricing in 78 percent odds that rates will be raised for the first time since 2006, ending the era of near-zero borrowing costs.

“Markets had time to prepare for this day, with investors winding back risks ahead of the event,” Tim Schroeders, a portfolio manager who helps oversee about $1 billion in equities at Pengana Capital Ltd. in Melbourne, said by phone. “What happens after the Fed rate hike is difficult to tell, especially since we’re coming into a quiet period around Christmas and New Year.”

U.S. data on Tuesday reinforced expectations for a gradual increase in rates, with the cost of living holding steady in November, underscoring scant inflation that is well below the policymaker’s goal. Tightening policy would solidify the Fed’s divergence from central banks in Europe and Japan.

Topix Gains
Japan’s Topix index increased 1.7 percent, it biggest gain in more than a month, as the yen weakened. Australia’s S&P/ASX 200 Index jumped 1.6 percent, while New Zealand’s S&P/NZX 50 Index climbed 0.6 percent. South Korea’s Kospi gained 1 percent. Markets in China and Hong Kong have yet to start trading.

China’s Shanghai Composite Index slipped 0.3 percent on Tuesday as trading volumes fell 34 percent below the 30-day average. Property developers advanced after the Communist Party’s Politburo vowed to stabilize the real estate market.

E-mini futures on the Standard & Poor’s 500 Index were little changed after the underlying measure climbed 1.1 percent on Tuesday. West Texas Intermediate rose 2.8 percent, adding to Monday’s 1.9 percent gain. Crude futures resumed losses Wednesday, slipping 1.2 percent. [Bloomberg]

FTSE Outlook and Prediction

FTSE 100 Prediction
FTSE 100 Prediction

Well here we are, Fed day in December and will they raise rates as has been inferred on previous occasions? Either way I am expecting that we will see a fairy big range today, quite possibly with a dip down to stop out the weak longs holding from sub 6000. That said, there is some decent support at 5993 area so if we dip here this morning this could be worth a long here. Resistance is at 6110 to start with 6175 to 6190 higher up. The news is at 7pm so its going to get pretty spikey around then so be aware of that. We also have a small dividend today, 0.8, which will be applied to any open positions at either 16:30 or 9pm depending on platform. We have had a decent rise since the 5880 low the other day, so some profit might want to get banked heading towards the news as well, and by tomorrow we should see if this was short covering/dead cat bounce or the start of a more sustainable rally. The orange arrow not he chart coincides with the Fed news so could be anything though we may well see a dip then rise back.

108 Comments

  1. Morning.
    Well here we are, potentially the Big Day, but first we have 10 hours to while away.
    Re volatility until the announcement (or at least the DOW open), I disagree with our Esteemed Leader, I think it will be quietish with most of the major players already positioned.

    IG predict 0.37% increase in Fed rate which smacks of compromise in itself, markets like a clear signal. Go big or go home Janet. 🙂

    An early drifting off channel on the DAX this morning, but Nick’s ~27 seems to be holding alright on the FTSE. I’m just playing rsi extremes and missing by a point or two at the moment.

      1. Took 5 on the balance, it’s all blue ink and it feels like a push for 50+ coming, needs a bit of help from the DA breaking 480 to go much further.

          2. Interesting ftse/DAX divergence since 09.45, +12 -25. Don’t quite know what to do with it though.

            Let’s try a quick arb -2 ftse 61, +1 DAX 460.

    1. Hi Senu, do you mean bull or bulls lol.
      Just light volume drifting really.
      Are you up for some BUYSELL tonight?

  3. According to Nick’s prediction it will be an attempt to create an impulse down then uptrust and down it goes? Did I get it correctly? So why aren’t they selling now? You can see quite a tight channel on Dax 70 points range. It will try to get out of it to catch stops, then go the other way to catch other stops and then go down in peace. Dax daily EMA are still in Sell and 38% retrace would be at 10621. So if it goes to 10621 and then to 10000 … not too realistic. And if this is the case – catch the long then catch the short and don’t try to catch the break out of the channel.
    As for me: try to stay out of it.

      1. I don’t know. I was commenting on Nick’s arrows trying to adjust to Dax chart. But it could be all completely different.

        1. The ftse and DAX seem to be a bit out of step this morning Jack, indicates how quiet it is. Lull before the storm and all that.

        2. Ok,Thanks I have a long from yesterday still open so only wondered.I am kind of waiting for near 10600,but it is really a punt,a bit of a trade left open last night,literally pence.Havent taken any trades today,just discovered the Fox+ tv channel.

    2. Gosh, you are brave, I wasn’t thinking about short yet. Like I said if I see 10600ish, maybe. It looks now like a spike and down afterwards. But when down?

      1. I know the feeling RJ. When it’s big news like that you get influenced in some ideas. But the truth is: price action, Ema etc. Nothing changed. It was bullish in the morning and it went up because if was pushing up. But it will get to a point where it may reverse (sharply or not) and indicators and price action will show then – I am going down.

  6. Wow, Bloomberg is even worse than I remember. Bored, I just clicked that link in Nick’s twitter feed re: ‘Neo Fisherians’ and wasted two minutes of my life reading it.
    The author’s conclusion
    “There’s a lot of uncertainty about just how things will work. Things may turn out differently than you think.”

    In other news, still thinking about the options expiry potential effect over the next couple of days. Worst case scenario is a huge meltdown caused by HFT algos feeding off each other, then an instant snap back up.
    In August I remember IG’s guaranteed stop loss went to 2000 points on the FTSE, I wonder what they’ll do this week?

    2. I don’t know the exact times for the US Coombsy.
      FTSE expires around 10.10 Friday, but there’s a whole raft of them over there, VIX today and then more tomorrow and Friday as this is an end quarter triple witching.
      It’s more the run up that I’m interested in.
      With a potentially big event happening just before expiry, granters of puts will be nervous about them being exercised should the market react negatively to the Fed and join in stoploss selling, exacerbating a sharp fall.
      They don’t have to wait till expiry.
      Other HFT’s will be primed to exploit this too. Fascinating stuff potentially.

        1. Opposite of lapse, you exercise your right to buy or sell at the strike price, which you obviously only do if it’s in the money i.e. strike price +- premium is above/below market price.
          IG options don’t allow this, they are binary, not ‘real’ options.

  9. Why do I keep thinking its going to drop. It has hit a resistance of 544 on Dax which was on my chart tallying with 667 on the Dow.

    I have take another short on the Dax 541. Hate the fact minimum stop is 18 on Dax but managed to drag it to 551 so effectively a 10 point stop. Target is 465.

        1. stopped out b/e. I’m going to wait till the FED and see what happens. Good decision to stay out today Senu 🙂

    1. You ‘grant’ or sell someone an option in exchange for a premium payment.
      If the buyer doesn’t exercise the option because it’s not worth doing then it lapses and you keep the premium.
      Your loss is theoretically unlimited as a granter, but limited to the premium payment as a buyer. Most sellers are banks, most buyers hedgers or speculators.

    1. Difficult to be sure with the DOW shut and just ghosting, if anything I’d have said the other way round.
      Since their close they’re only up 115 and we’re up about 60.

        1. A bit of hindsight there really to be fair chippy, before their opening it would have been showing over a 30 point loss against 12.50.
          14.30 would have been a good entry for sure though.
          Are you out to play later?

          1. As a “back-jobber” I am unbeatable tmfp!
            Later, hmmmm. I’m thinking plenty of hype with little interest so will have i-pad on my lap whilst nursing a cheeky pint of brown and frothing. To be fair all I’ll probably do is watch unless there is a move of more than 100 points either way.

    1. Options are fascinating, a whole separate world. You can play an options index, the VIX, V as in volatility.

  15. Surge, does it mean the price will go up or down? I am reading here: “With the Dow Jones currently looking at a 100 point surge at the open, the US markets still have a few more hurdles to overcome before the Fed reveals its rate hike decision this evening.” So what the surge means? I am nor familiar with this terminology.

    1. straight out -6 It had to happen lol, picking up dimes from in front of a steamroller
      Going for a pre DOW walk

      1. It’s raining 🙁
        One last try, or maybe not, short 88.
        I’m going to keep on until I hit the top, hopefully snatching a couple of points on the way.

  17. I’ve enough of this long. It’s getting too risky before open, got out with 8-9 points (half stake). No Surge.

      2. Seriously though, I think a volatility play like yours with the out of money options is a good low risk way.
        Maybe some wide longs and shorts….
        I’ll trade the DOW, so say it’s 17700 at 18.45, maybe longs at 17200 and 17000, short at 18000? Something like that?
        IG guaranteed stop is 180 atm but will no doubt increase later.
        Maybe I’m making too big a deal of the potential, but would kick myself if I missed it.

        1. Good, I am thinking to buy some puts when it spikes 100+ pt around 7:01 and the vice versa. Not going to mess with cash/futures. GL

        2. Basically -98 quid now which is 49 points my usual stake. All yesterday stuff gone. Yes, I am back to where I was at the beginning of yesterday +3, 4 points. Just didn’t come out of my long, then decided to add to it, added too much. Basically crap. Didn’t save myself. Didn’t expect, although I did expect I suppose just was stupid.

  24. Everything’s looking quietly rubbish really, the FTSE doing the best of the three.
    Looking for a short around 75
    Missed it

          1. I’ll keep this till after the close, I think we’re too dear comparatively and will drop further before 1700

  26. After all my thinking was right in that it would drop as I was seeing it on Dax but it just kept making new highs just to do some stop hunting. Days like these my tight stop strategy doesn’t work. Glad I didn’t watch it until now. I’m now watching the charts with no bias which is good zone to be in.

    1. I’m not holding any positions didn’t trade after my second trade. Its more like a lottery trading the FED news. 637 on Dax a possibility if it shots up.

  29. Well, here we are again.
    If this turns out to be a damp squid, I’m going to look a bit of a prat, but that’s nothing new and you never know…
    DOW right now is slap bang in the middle of its recent trading range 17200-17800, at 17550.
    First things first, a pre announcement stop hunt. At 18.57 I’m going to put in buy/sell orders 100 points either side of the prevailing price, valid for 2 minutes. , no stops.
    I’ll also have sell orders at 750 and 850, stop at 18020. The 20 is very important 🙂
    Buy orders are trickier because of my preoccupation with the options thing, so they’re in at 17200 and 17000, stop 16850.
    Also a short at market at 19.00, 150 pt stop.
    Small stakes but I’ve budgeted for the worst plus a bit of slippage. About a week’s average profits.

  31. Confusion reigns
    Bench price was 17600 so I shorted filled at 596. My 17500 long also got filled why I don’t know because of time limit but not arguing. I sold again as soon as I realised that I was all square at 620. I wasn’t impressed with the reaction so shorted more at 45.
    So currently short 2×633 with 1×98 in the bank. And no outstanding orders. I think.
    Her news conference is likely to go on a while after which I think the sell off will start in earnest. Stop 82 so free bet minus any slippage.

    1. Will be very surprising if there is a sell off. Everything came in as expected, including an accommodating future bias, that along with it being latter part of December, I think stock pickers can look forward to gradual rise for the rest of the year.

      1. Quite likely you’re right, just stopped out.
        Everything came in as expected on the 3rd with Draghi, but that didn’t stop a “what now?” sell off.
        It was a sell the news gambit rather than a long term view, but I think the reaction is disappointing, will be interesting to see where we are Friday close.

  32. I was tempted to jump in on that when it dropped and it was on its way up. But bottled it. Thought I best to watch and learn. Maybe next time.

  33. Didn’t do anything! Put a cheeky sell on the ftse at 6150 but have got plenty lower than here ( and some higher!). Back to Santa rally, let’s see if we can get to my 6300 target. If we do get there I think I’ll be joining tmfp as forum bear for January.

  35. Guys, I have a December expiry coming up which I would like to extend into the next quarterly contract, so does my December need to close before the next one is opened? Do I have to take the losses from the current contract or are the losses carried over as if it were a daily rollover bet? If the losses have to be taken, do you open the next quarterly with the reduced balance (since there was a loss)? I am not too familiar with futures contracts as I have only really ever dealt with daily rollovers.

    Appreciate a prompt response on this. Thanks

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