Support 6106 6104 6085 6054 Resistance 6156 6188 6210 6233 6260 6303

Good morning. The markets looked set for a positive start to 2016 but this was cut short by weak China economic data overnight. There was an unexpected acceleration in the decline of China’s factory activity in December which sent the world markets southwards. China’s benchmark share index fell 7% on the news which prompted the stock exchange to halt trading for the rest of the day, so this aggravated the sense of unease in other markets when they opened. The sector to fall the most was commodities (as China is seen as the major driver for commodity prices) however oils fell less so as Middle East tensions put a floor on oil prices. After a failed rally around 3pm (UK time) the FT100 fell again nearer the end of trading and closed down 148.89 points (2.39%) for the day. However, China moved to support its sinking stock market as state-controlled funds bought equities and the securities regulator signaled a selling ban on major investors will remain beyond this week’s expiration date, according to people familiar with the matter. If this sets the tone for the year its going to be a bumpy one, but with the potential for some decent trades if you run the winners.

US & Asia Overnight from Bloomberg
Asian stocks stabilized after the worst start to the year since 1988 as China’s central bank added funds to the financial system and U.S. equities staged a late rally.

The MSCI Asia Pacific Index was little changed at 128.93 as of 11:05 a.m. in Tokyo, swinging between losses of 0.4 percent and gains of as much as 0.2 percent. China’s regulator moved to reassure investors after Monday’s plunge engaged the nation’s new market circuit breakers on their first day.

The People’s Bank of China conducted the biggest reverse-repurchase operations since September, adding 130 billion yuan ($20 billion) of funds to the financial system after money-market rates climbed to an eight-month high. The circuit breaker plays an important role in stabilizing the market, and the government will work to improve the system, China Securities Regulatory Commission spokesman Deng Ge said in a statement Tuesday.

“There’s more easing ahead from the Chinese,” Shane Oliver, head of investment strategy in Sydney at AMP Capital Investors Ltd., which oversees about $115 billion, said by phone. “I expect them to cut interest rates and/or the reserve-requirement ratio again. We’ve been reminded that volatility in financial markets remains high and that the global economy still needs monetary policy support.”

Asian equities are reeling from the first back-to-back annual losses in a decade amid concern weakening Chinese growth and tighter U.S. monetary policy will choke off an earnings expansion. Regulators halted China’s stock market Monday following a 7 percent slide.

Global equities had their worst inaugural session in at least three decades on Monday. The MSCI Asia Pacific index slumped 2.3 percent, the most in three months, after the first economic reports in 2016 suggested concern over the world’s second-largest economy won’t easily dissipate. Evidence of slowing manufacturing in China triggered the selloff that halted trading in Shanghai.

Losses spread as data showed manufacturing in the U.S. contracted in December at the fastest pace since 2009. U.S. markets recouped some of their losses in the last few hours of trading with the Dow Jones Industrial Average almost halving its decline.

Most markets halted their plunge on Tuesday. Hong Kong’s Hang Seng Index and the Hang Seng China Enterprises Index of mainland shares traded in the city were little changed. The Shanghai Composite added 0.5 percent. Japan’s Topix index rose 0.3 percent and South Korea’s Kospi index increased 0.7 percent. Singapore’s Straits Times Index was little changed. Australia’s S&P/ASX 200 Index lost 1 percent and New Zealand’s S&P/NZX 50 Index declined 0.8 percent.

“Investors need to be more cautious,” said Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, which manages about $21 billion. “Growth remains a concern. How the year plays out is unclear, but the only surety is that volatility will increase.”

Futures on the S&P 500 added 0.2 percent. The underlying index closed 1.5 percent lower on Monday after dropping as much as 2.7 percent during the day. [Bloomberg]

FTSE Outlook and Prediction

FTSE 100 Prediction
FTSE 100 Prediction

We tested (and dipped slightly below) the 6080 20 day Raff support yesterday but bounced back from that overnight to reach 6160, mainly helped by the China stimulus. As such, that might settle things a bit for the moment but its been a pretty wild start to 2016. For today we have the pivot area at 6156 for initial resistance, and the 10min chart suggesting an initial dip. If we do then the 30min chart is suggesting that 6106 are is a good spot to go long, along with the bottom of the 10 day Bianca channel here, to target a rise towards the 6188 area. This is resistance on the 2 hour chart, and the bulls will be keen (and need to) break this area to push any higher. Just prior to 6106 there is some support on the 10min chart at 6117, so we may see the buyers start to come in around this area. If 6106 breaks then we are likely to test the bottom of the Raff again at 6086, and possibly the 10 day at 6043. It’s jittery thats for sure, so keep the stops tight, run the winners and cut the losers ASAP.

81 Comments

  1. Morning.
    Not being a smart arse, but these opening pumps are like taking candy from a baby.
    Another highly authentic closing rally in the US and Chinese feedback about gov intervention make it dangerous to get too carried away on the short side.
    Not rabid bear today, but selling into strength.

    1. Morning, conversely I am a bit of a rabid bear! Happened by my i pad at around 9-ish last night just as I was settling down to watch the attractive young Ms Fox on telly and thought I’d better let them have a few, so short at 6140.

      1. Good shout chippy, looking good now 6100’s history by the look of it.
        I wonder if we’ll see four figures on the DAX today?
        Or will VW rally and hold them up lol…how much are the yanks talking about in fines? $90 billion? LMFAO.

        1. Again, conversely I’ve just closed half at 6100! Will run balance now I think.
          Interesting thing…maybe not… It seems to me Dow has been running an average premium of say 11,400-11,600 to FTSE for ages, now it is below or around 11,000, without a similar % smash in both indices. I’m not a buyer at 5950 anymore!!

    2. All out of short now bar a token, looking for some buying to materialise between here and 6100. If it ploughs through, then a trend day possibly (hint, not up).

      1. Morning All,
        We are at Nick’s suggested level of about 6106 …
        RSI T at this level – but I’m not convinced – see if 6101 is supported.
        If not looking at about 10 – 15 points lower for a L entry.
        My original area of support was about 6078..

  2. Looks like you’ll have to do without me after this session lol, I’ve just been told by my better half to pack a case and clear my diary for a week, she has a surprise for me tonight.
    Working on the basis that she’s not chucking me out, looks like a bit of winter sunshine is on the cards. 🙂

    2. That’s a relief and will give me the opportunity to get some much needed bandwidth to spout off !
      Enjoy – 🙂

      1. It wasn’t even a bounce really, more like a slide into the gutter.
        When are you turning mega bear then Nick? Go on, you know you want to.
        Sell all those useless shares and buy bitcoin (and VIX) 😉

      1. Beat you to it Hugh, a little rsi at 84, was tempted for 10 but still holding, b/e stop now.
        It just looks so awful that I think there’s a cautious long in there somewhere.

          1. Yep — Know what you mean
            – When it was 6114 – I felt I was experiencing classic poor trading on my part – see a price & then not take it & then looking at higher prices that I didn’t want …Urgh!
            And as you say ” classic ‘revisit the scene ”
            – had an order at 95 filled and stopped for a 3 points..

          2. Gad this is dull.
            Wondering if I should have stuck to my original plan
            L 6078.
            Price at roughly yesterday’s cash close 6092.
            Going to stick with L 6073 (PRT Line) – Stop 6063
            & get on with some other stuff.. unless I get a Trio signal.

          3. Yes it’s difficult. In that case the ‘scene’ for me was 98, sometimes they overshoot so I usually allow another ~5 for luck.
            And yeah on the 14 too, it was showing all signs of having had enough but I’d got it in my head there was a 50% in it.
            Live and learn.

            Broken out of the 3 min downtrend now, so yet another long attempt at 90. Got myself the wrong way round since that good start, but will persevere.

        1. Hi guys,Happy New Year WSF,Hugh,I have been looking more at the charts and time frames yes,also looking at ATR some good videos by Linda Raschke talking about not placing to tight a stop when trading in the “noise”she talks about 3 x ATR,so if you are on the 5 min chart it’s the range of 3 five minute candles added together I think.things like that rally on the Dow last night just turn up out of nowhere though so it’s hard to predict that whichever way you look at it in my opinion.Just looking at Dax and Dow now Its suggesting long to me but we’ll see.best of luck and thanks for your help.

          1. I used to use a 14 period ATR s/l on the daily for longer time frame stuff,but imo it is at its best in a trend you are trying to stay in when there is a trend.
            I think there are signals that run as high a probability as 70%,with a bit of caution around events like nfp and so on and someone like Jack Schwager who has Traded and interviewed top Traders (Market Wizards)is worth reading about Tech stuff.I have a few of his books and if you read them a few times you can recognise patterns from his examples that will atleast help with entries and so on eg yesterday that Pennant was a continuation signal,so you wouldnt have taken that Long entry when you did and you’d have saved some energy and if you’d gone short from it it would have made money.Anyway good luck hope this is a good year for us all.

          2. I have the first Market wizards book by Jack d schwager WSF but just the first one,can you recommend any books that go into the patterns on the charts that would explain the different formations,I only know really basic stuff,double bottoms I learnt about from you I think flag formations and you mention a pennant above I don’t know about,chart patterns sounds like a good area to investigate further thanks.

          3. Just found a video on you tube covering Bull Flags and symmetrical triangles,going to concentrate on those two next.nice bit of interesting homework.

          4. I’m mostly watching CT Fletcher on You Tube at the moment 🙂 ISYMFS stuff and the Gym coaching,that’s inspirational,but re books they all cover the same things really,even the Dummies book by Barbara Rockefeller,but Schwager’s book “Getting Started in Technical Analysis” is his idea of the key stuff and has his opinion on the most important bits from Market Wizards.It’s easy to reread.
            “One Evening,while having dinner with a fundmentalist,I accidentally knocked a sharp knife off the edge of the table.He watched the knife twirl through the air,as it came to rest with the pointed end sticking into his shoe.”Why didnt you move your foot?”I exclaimed.”I was waiting for it to come back up,”he replied. – Ed Seykota,sort of thing.I think the people that dont like it dont like that stuff or only read the first chapter which is a dated defence of Tech as an idea.
            You might like Trading In the Zone by Mark Douglas on mental stuff,discipline stops etc etc.I just dug that out to read.

            1. These are worth a read too
              Trading for Dummies
              Trading in the Zone
              Naked Trader
              Beginners Guide to short term trading

          5. Hey thanks WSF I fancy that getting started in tech analysis,just by the way what do you think of going long on EUR/USD now?

          6. Thanks Nick,I’m making a note of all the suggested titles,do you cover the chart patterns on your seminars?

          8. Re Eur/USD havent looked at FX lately,I think Nicola Duke has had that as a theme for a long time,but I am working my stats with indices at the moment,my average over 150 trades = 1S/L = 3 wins,so I cant make more or work less without doing something about that or finding “one big trade” to tack on to the rest.Currently I have raised my normal stake by 10% and reduced my trades.Only mention it because I think it’s useful to track stats and try to use the info to change stuff.

          9. “My average over 150 trades = 1 S/L = 3 wins”……does that mean you got three winning trades for each time you hit your stop loss? Just want to be crystal clear,that seems pretty good to me.

          10. Sorry,no,I meant it took 3 average sized wins to replace the damage from one average Loss over those 150.I have rolling targets for when I withdraw money,so I want to reduce the time between withdrawls by reducing the damage or reducing the Stop rate.On the 31st I had 11 trades across 2 markets 2 were stopped out but I made 30 and a fraction on the day,so if you look at that as a day total it is ok,but the stats show it was garbage and the reason I cant reduce my hours.I can change everything very quickly by reducing that 3 to 1.That is what I am thinking anyway.

          11. I think smaller stakes and wider stops perhaps might help,just had a look at that double bottom on EUR/USD so much for that theory on this occasion,it’s just carried on dropping.i think disapline is the holy grail,keeping our position sizes the same even after a string of wins,the one where we go deep due to overconfidence is the one that gives back all our gains and then some.

          12. Yeah the trouble is most of the cash is already accounted for before I get it 🙁 need to get ahead there to get perspective.It’s worth looking at a Stoch with the pattern or whatever when it’s possible although just waiting for confirmation is obviously safest and gives you a precise place for a S/L,more precise than what you get from S or R because they are areas,which is another advantage for patterns and so on.

      2. Hey Hugh you are right.tmfp picked up on my tendency to trade my opinion rather than what is right in front of me,he was spot on,I still tend to do it but I’m more aware now hence my first trade of 2016 was a short! I’m really trying to keep an open mind but shorting at these levels without a tight stop could be costly if the unexpected happens.

        1. Sure, but there is a third option: do nothing, until an area or price that you have identified as a potential entry point is reached.
          If you see upside potential fine, but try and get as good an entry based on technicals as poss, don’t just press ‘buy’..
          It’s draining and no fun to be behind the game straight away.
          A good entry gives you more options, if it doesn’t go the way you planned then you’re more likely to be able to dump it at a profit or minimal loss and be ready for the next one, rather than nurse red ink for hours/days.

      1. Hi tmfp yes I dumped that long yday for +3 I posted it under my original comment,My thinking is currently long with a wide stop,I’m 20 pts lower than yday at least,if you go away tmfp have a great holiday.

      1. 😳 😳 😳
        anstel,obviously Trading to Win too,the time frames to look at etc etc.
        Thanks for those Links and for Trading to Win Nick.

  5. That was what I was after and missed, only 25 pts, but there’s life in it yet.
    Initial thought is to short it, but let’s see how it develops.
    Noon rally again, getting predictable.

        1. S 6132 (RSI T Trade)
          Will add at if it moves a little higher
          Stops 6143
          T 6122 – 6112 – 6102

          1. I’ve just been out too, that re-break of 6100 was quite emphatically bought and it seems fairly comfy around 6130 atm, but not much basically changed.

          2. I’ve come out for the time being (6130)
            – Always a bit careful with RSI T Trades – some work – some don’t !
            – seems to be happy 6130-40.

          3. Good trading Hugh, look at it as +2 you didn’t have yesterday 🙂
            We talked about it a while back, pure rsi driven positions definitely have a short shelf life.

          4. Gone be one of those days I thinks..LoL.
            6152 – 6166 – 6209 (PRT Levels) would be better but not on offer at the moment 🙂
            Don’t always pay to much attention to these but 6136 is today’s PP

          5. It’s the upper end of nomansland at the moment I think, not much to latch on to.
            Just chipped an rsi +5 off 46, otherwise more interested in rifling through SigOther’s browsing history to see where we’re going, but she’s one step ahead, must have booked it on her phone. 🙂

          6. Hey tmfp,delete C cleaner of her PC, you might be going on a skiing holiday for all you know Lol !!!!

          7. Anyone else got any ideas ?
            …. it could be a week of Tantric and Meditation with Sting and Trudie – understood they were doing courses..:-)

          8. Lol, no we don’t do skiing unless attached to a boat.
            The concept of going somewhere cold for a holiday doesn’t compute with me.

          9. It could be Costa Rica, she was showing signs of interest in a TV prog the other night. Long way to go for a week though…

          10. Hi tmfp,hope that you have a good trip.It is Northern Lights season so I wouldnt rule out a cruise or an Igloo yet 🙂 .

          11. Trades I’ll be placing tomorrow first thing…(7:00 am)

            Short 6188
            (A move to 6188 would be a 50 point gain from cash close. This is an
            inflection point.
            R2 stands at 6215. 1 Hr Trend Line down across the tops = 6188.
            6186 was the Hi of Monday 4th )
            Stop 6211
            Target 6165 – 6142-6120.
            This is quite a wide stop so will reduce the stake a little or look for
            a higher entry (e.g. 6200).

            Long 6076
            ( A move to 6076 would be a 60 point decline from the cash close.
            Support seen twice in the last couple of days
            in this area. S1 stands at 6089. )
            Support again today at 6077
            Stop 6063
            Targets – 6090 – 6103 – 6117

  6. Just watching the “buy the dips” recommendations roll in.
    We may get one before the close, looking a bit unconvincing up here.

          3. only got one short in at 42, and looking to take it out now at 26 for a closing bounce, not confident enough to long though

          5. nope trying to be too clever out -10
            and that’s it from me, good luck all, catch you soon.
            🙂

  8. Trades I’ll be placing tomorrow first thing…(7:00 am)

    Short 6188
    (A move to 6188 would be a 50 point gain from cash close. This is an
    inflection point.
    R2 stands at 6215. 1 Hr Trend Line down across the tops = 6188.
    6186 was the Hi of Monday 4th )
    Stop 6211
    Target 6165 – 6142-6120.
    This is quite a wide stop so will reduce the stake a little or look for
    a higher entry (e.g. 6200).

    Long 6076
    ( A move to 6076 would be a 60 point decline from the cash close.
    Support seen twice in the last couple of days
    in this area. S1 stands at 6089. )
    Support again today at 6077
    Stop 6063
    Targets – 6090 – 6103 – 6117

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