Support 6159 6150 6110 6100 6088 Resistance 6197 6227 6238 6278

Good morning. On the final day of trading for the year the FT100 closed well below its peaks of 2015 after weak commodity prices weighed on markets in the final quarter. Brent crude oil prices stayed near 11-year lows and has shown little sign of a sustained recovery. The slowdown in China, the world’s second-biggest economy and a major consumer of commodities such as metals and oil has kept down commodity prices for the second half of the year.
Statistically the FTSE has underperformed its European rivals partly because commodity-related stocks account for a bigger part of the FT100 weigthing than European counterparts.
The 6250 area has been revisited on a number of occasions over the last 6 months and the FT100 closed near this level again at the end of the year.
As interest rates rise in the US it will make it difficult for markets to move higher in 2016, however the focus is more on China and its ability to stop a hard landing economically – reinforced by the Chinese rout today seeing a 7% drop and triggering the “circuit breakers”.
Things are also heating up a bit in the Middle East with Saudi Arabia (and then the US and UK etc on one side) and Iran on the other (with China and Russia behind them) after Saudi executed a prominent Shia cleric. Going to be an interesting January (still think dip then rise for the month).

US & Asia Overnight from Bloomberg

  • Japan’s Topix index heads for biggest slide since October
  • Chinese shares slump in Shanghai and Hong Kong trading

Asian stocks headed toward the biggest drop in three months as investors started the new year seeking safety amid renewed signs of a slowdown in China and escalating tensions in the Middle East.

The MSCI Asia Pacific Index slid 1.7 percent to 129.69 as of 12:17 p.m. in Tokyo. The yen surged, dragging shares in Tokyo lower. The Shanghai Composite slumped 3.9 percent as a private gauge of China’s factories unexpectedly fell. Saudi Arabia expelled the Islamic Republic’s diplomats from the country following an attack on its embassy in Tehran to protest the Saudis’ execution of a prominent Shiite cleric, marking the worst crisis in relations between the nations since the late 1980s.

“It’s a poor start of the year with a lot of bad news such as weak economic data from China and heightened tension in the Middle East,” Win Udomrachtavanich, Bangkok-based chief executive officer at One AssetManagement Ltd., which oversees about $3.5 billion, said by phone. “Most investors expect the tension between Iran and Saudi Arabia will be contained and limited. Still, it becomes the big risk for the financial markets today.”

Asian shares are trading for the first day of 2016 after posting back-to-back annual losses. Brent crude tumbled 35 percent last year and the Bloomberg Commodity Index slumped 25 percent amid an oil supply glut and as Chinese economic growth slowed, pressuring equity markets and corporate profits.

Regional Gauges
Hong Kong’s Hang Seng Index lost 2.5 percent on Monday and the Hang Seng China Enterprises Index of mainland firms trading in the former British colony slumped 2.8 percent. The China Caixin factory index came in at 48.2 in December, a report showed Monday, missing estimates for a reading of 48.9. On Jan. 1, China’s first official economic report of 2016 signaled manufacturing weakened for a fifth month, the longest such streak since 2009.

Japan’s Topix index fell more than 2 percent at the lunch break, after climbing 9.9 percent last year for a fourth straight annual gain. Australia’s S&P/ASX 200 Index was little changed after swinging between gains and losses. South Korea’s Kospi index fell 1.4 percent and Singapore’s Straits Times Index declined 1.6 percent. New Zealand’s equity market is closed for a holiday.

Futures on the Standard & Poor’s 500 Index slid 0.3 percent on Monday. U.S. stocks fell on the final trading day of 2015, with the benchmark measure losing 0.9 percent to cap a 0.7 percent annual drop. [Bloomberg]

FTSE Outlook and Prediction

FTSE 100 Prediction
FTSE 100 Prediction

Well 2016 has started with a flourish, with China down 7% today, Middle east tensions ratcheting up, oil and commodity prices still falling (with a rumour that diesel pump prices might dip below £1 a litre in the UK), interest rate rises started in the US (and the UK more than likely to follow later this year). So against that back drop we should see a rising FTSE as is usually the case. For today, we have resistance at the 6200 area initially on the 10min chart, and 6209 on the 30min so I feel if we get an early bounce to this level then a short here is wroth a go to target the bottom of the 10 day Raff. Usually the start of a new month and new year would be a bit bullish as new money flows into ISAs etc, however, with that China rout we may see a bit more of a subdued start. Above the 6200 area the next resistance level is 6278 on the 2 hour chart and another level that looks a good shorting spot. If the bulls were able to break this then we will be back on a path towards 6387 where we have the 200ema on the daily. Support wise for dips today we have S3 at 6159, though we have already broken S1 and S2 with the Chinese fall. Below that 6140 for the daily Raff and 10min channel area, then 6100. So fairly simple plan for today, thinking a long around the 6160 area and a short around the 6200 area, both of which we may well see by lunchtime.

63 Comments

  1. Morning all, great start to the new year, bagged 25 ticks from near the low of this drop. lets hope the rest of the year will be just good. Not convinced it will climb back up. Think we’re in for a red day?

  2. Hello everybody, HNY and good luck for the year of the Monkey.
    Congrats to those patient bulls who exited on Santa’s brief visit to LaLaLand, some cheap replacements about this morning, if you want it.
    6100 held well and a sellable bounce in progress atm, just dumped a spec long from the lows at 6150 and looking for a short, having completely missed the early drop.
    First FTSE trade for me in 2016 a long, didn’t expect that.
    Took a nice +200 (11%) on my VIX long, I would recommend having a serious look at trading it as a hedge or outright spec this year.
    Intraday, would expect continued support around 6100 until we see how the US reacts to this, holding a 50 short now, 15 pt trailing stop or 6110.

    1. Out at 18, time for another bounce, that could have been the last of the early liquidation (flw).

  3. Morning 🙂
    First order – that I posted last night – dumped.
    2nd Long 6116 – PRT – Closed at 6140 .
    Had this move back down to 6112 9:02 formed a base ??

    1. Hi Hugh, not so much a base, more a level beyond which r/r is pretty unattractive to sell.
      I think that’s it for the morning fireworks, although I would be interested to see what happens if 6100 is tested again, there could be a 50 point hole underneath.
      Upside limited to 150 until DOW imo.
      This all precipitated by China’s limit down, a market mechanism widely prevalent in commodities when I started trading. Can be very nasty and create volatility instead of calming it, with carry over margin selling into the next session. The Chinese retail market is quite small though, but that 48.2 PMI is lock the doors and walk away levels.

      1. Yep – 6100 “more a level beyond which r/r is pretty unattractive”
        Nicely put..
        “carry over margin selling into the next session” – I see..
        I’m not sure if I’m correct in looking at this – USD/JPY – as I read somewhere – indication carry trades being reduced. 11877 Important level – going back much of last year – which it touched in the last 24 hrs.
        Maybe I might be over complicating this looking at it … just a thought

        1. OK – So the orders I’m going to run with until midday & then review….
          Long 6112 – Stop 6100 – Target 6124 – 6137 – 6149 (R:R 3:1)
          Short 6171 (PRT Trend Line) Stop 6186 – Target 6157 – 6142 – 6127 (R:R 3:1)

  4. Interesting half hour coming up, DAX has lost its s/t uptrend and really needs to hold the days low 10340 or we could be in for that 6100 test pdq.

      1. Morning all,see that madness and raise you,my first trade was a decent Long in Australia 🙂 seems a long time ago now.

        1. I’d say 8.30 to 9.45 on the 5min is a pennant and give it some space since it did break to the downside,but I’m feeling a bit cautious so only imo fwiw.

          1. Just trying to restrain myself here, looks pretty vulnerable to a crack at <6100/13300.
            If it can make it to noon intact then 'buy the weakness' would have been right.

          4. Well, got carried away with the first marker entry but kept selling that rally and hoping/thinking this will be the break of support all round.
            Targets 6080 and 10300.

        2. Well as Tmfp mentioned late last year Dow is in the range of 17100 – 17 700 ish,so long as the Dow holds 17100 I think it’s fair to expect a little upside.The Dax is relatively low as well but if it breaks to the downside could be messy.

  7. Good Morning All,

    I have taken a long 342 on Dax with 22 point stop, expecting a close above 366 on the one hour candle then my target is 465.

          1. Get this mini rally out the way that’s a reasonable target
            6100 now big resistance for me if it doesn’t rebreak asap

          1. It’s worked off the oversold readings without any rally of note to go with it, I can only see more downside, then maybe a pre DOW rally.
            Hey presto, new lows as I type. Continuing to take out short down to 60’s.
            Don’t pick bottoms, the DOW is scheduled to open around the massively important (for me) 17100 level.
            An algo fest could turn this into a Black Monday and another limit down China.

  9. Happy New Year all. This all looks pretty messy to me and whilst I don’t think it’ll straightline but imagine a pretty good smack to below 6000. Especially since IG chart thingy has got “The Upside Prevails” as a headline. Should have had the courage of my convictions last week when I said 5700 before 6700 and shorted the hell out of it – didn’t so sitting on my hands. I suppose I’ll start thinking about buying a bit if we get down to 5950-ish, despite tmfp’s dream of 5200.
    Good luck and have fun!

    1. Same to you mate.
      I was mouthing off drunk over the NY and took a rather large 5200 before 7200 evens bet.
      The only upside macro I can see to turn this into a bear trap is if the Saudis and Iranians start lobbing more than insults at each other.

        1. This year or the stakes go to charity. I did in fact say before Easter but wisely decided against making it a condition.

      2. More “difficult” than usual to call tomorrow’s open.
        There’s not much conviction behind these calls but they’re useful for reference.

        Long 6078 Area
        Stop 6066
        Targeting 6089 – 6101 6113

        or

        Short 6198
        Stop 6212
        Targeting 6185 – 6171 – 6157

  11. HNY to you all. I’m back first day watching the markets. So much of a Christmas rally, eh? Brave, RJ, trying a long but EMA on 10 min are too bearish.

  12. Happy New Year All!
    We had some long order this morning with Nick, first long from 6161, overall +5, but then second long from 6109 and out 6149.5, now mostly side lined for FTSE.
    But what a start to trading this year!
    Good luck all!

    1. Not affecting us much right now, but that quiet pre opening DOW -50 in half an hour doesn’t look too promising.

    1. This is its third go at breaking 17100. I know it’s already down a lot overnight but it would be reasonable to expect to see some stops hunted for and triggered if it hits around 050 at the opening.
      On the other hand there’s always the Plunge Protection Team ready and waiting.

      1. How peculiar this FTSE strength is comparatively. Showing a bit of weakness now but I’d have had us sub 00 by now given that DOW.

        1. Maybe Osborne’s bunged Carney a few quid to set up our own.
          Still short here av 14, waiting, waiting.

          2. Lost all rhythm with this choppiness, still think the DOW’s vulnerable to further selling but looks like it will be after our close so took 10 on balance of short.
            Let’s see what the next half hour brings.

  15. Hey tmfp, can I ask do you watch both the ftse and Dow Simultaneously all day or do you focus on one chart more? Just my thoughts are how much influence does the ftse and Dow have over one another when the Dow is out of trading hours?

    1. I don’t even look at the DOW till about 14.00 Coombsy, what’s the point if it’s shut?
      I go FTSE/DAX 0700-14.00, FTSE/DOW 14.30-17.30 then just DOW if I’m still about, although I 99% only trade FTSE.

      Out of short for +12. A bounce coming up and maybe some more selling before or just after the bell I reckon.

      1. So am I right in saying that the only influencing movements on a closed index is from the other open indexes from around the world. ? Sorry for lack financial savy.

        1. I watch simultaneously open markets for their comparative ‘feel’, support and resistance levels and so on.
          They don’t have to exactly follow each other in order to give you hints about spill over effects they may have on each other and, like sometimes just before our close, it’s possible to see clearly what is a ‘local’ move and what is global. E.g. a spike in price on one index and not another would indicate that the spiking one would not maintain the change as it was probably just a large ‘local’ trade that caused it.
          A closed market will ghost the open ones to an extent but for me, trading short term, I need the volatility and liquidity of an open market.

  16. So, MHH coming up, DOW within spitting distance of the 16000’s and us at 6096.
    What to do….let’s try a short for a change lol, 17000 to break and 80 to be revisited, maybe only briefly

  17. A cracking day for the bears, now all down to the DOW and China to see what we’ve got to play with tomorrow.
    See you then.

  19. More “difficult” than usual to call tomorrow’s open.
    There’s not much conviction behind these calls but useful for reference.

    Long 6078 Area
    Stop 6066
    Targeting 6089 – 6101 6113

    or

    Short 6198
    Stop 6212
    Targeting 6185 – 6171 – 6157

Comments are closed.