Support 6711, 6694, 6675, 6660 Resistance 6732, 6750, 6769, 6795, 6824

Good morning. Well that wasn’t very bullish yesterday at all, despite the fairly positively received Autumn Statement. Unfortunately it never even popped up to the resistance for the short to take and 6730 eventually broke leading to the 6715 pivot instead. That did hold but didn’t offer up lots of points for a bounce. Despite The US holding up pretty well and the S&P breaking that 2070, and nearly reaching 2077, after data showed widespread hiring across the US (Beige Book), the FTSE failed to gain much upward traction, most likely waiting for the ECB today. With yesterday lacklustre performance prices have dipped away from the top of the daily channels, though they remain around the 6770 area for the top and 6660 for support.

Asia Overnight from Bloomberg
Asia’s benchmark stock gauge rose, buoyed by surging Chinese shares and Japanese equities following the dollar to its strongest level since 2007 versus the yen. Gold slipped while oil climbed.

The MSCI Asia Pacific Index added 0.5 percent by 2:48 p.m. in Tokyo, as Japan’s Topix index rose 0.7 percent toward the highest level since December 2007. The Shanghai Composite Index jumped 2.6 percent. Standard & Poor’s 500 Index futures fluctuated with the greenback at 119.90 yen and near a two-year high against the euro before the European Central Bank decides policy. Gold lost 0.3 percent. Australian bonds rallied, while oil in New York rose 0.8 percent.

Global bond yields are holding near historic lows before the ECB decision today amid speculation policy makers are moving closer to buying government debt to combat deflation. Investors are awaiting U.S. payroll reports tomorrow after private data yesterday showed steady hiring and a accelerating services growth. China’s benchmark stock gauge surged 16 percent since Nov. 19 as an interest-rate cut and speculation for further easing drove record turnover.

“We have the back-to-the-future theme” in markets now, said Sean Darby, chief global equity strategist at Jefferies Hong Kong Ltd. “We have the sort of environment we had in the late 1990s, which tends to point us to a pretty good period in equities. Low bond yields, no inflation, commodity prices well behaved, and equities did quite well during that period.”

Japanese Shares
Japan’s Nikkei 225 Stock Average added 0.8 percent, headed for its highest close since July 2007. Japanese equities have been climbing amid a retreat in the yen after Prime Minister Shinzo Abe put off a second increase to the nation’s sales tax and called a snap election. The Bank of Japan also unexpectedly bolstered stimulus Oct. 31.

Hong Kong’s Hang Seng Index increased 0.8 percent and a gauge of Chinese companies listed in the city added 2.5 percent. Hong Kong’s benchmark stock gauge fell 2.3 percent this week through yesterday, when the measure dropped 1 percent as short-selling turnover on the city’s bourse surged to HK$20.1 billion ($2.6 billion), the most on record.

The Shanghai Composite Index, which closed at the highest level since July 2011 yesterday, is up for the 10th time in 11 days. The volume of transactions was 27 percent above the 10-day average for the time of day today after turnover on the exchange jumped to an all-time high yesterday.

The benchmark gauge for mainland China’s biggest venue may rise to the 4,000 to 5,000 range next year, 21st Century Business Herald reported, citing Yin Zhongli, a vice director at the Chinese Academy of Social Sciences’s financial market research office. It closed at 2,779.53 yesterday.

Oil Gains
WTI oil rose for the third time in eight days, climbing to $67.89 a barrel in New York. Data from the U.S. Energy Information Administration showed the nation’s oil inventories dropped by 3.69 million barrels last week, after analysts forecast an increase of 1.75 million.

Brent oil climbed 0.4 percent after falling 0.9 percent last session to a more-than-four-year low of $69.92 a barrel as investors continued to digest as decision last week by the Organization of Petroleum Exporting Countries not to cut production.

The yen slid as much as 0.1 percent to 119.95 per dollar today, the weakest level since 2007. The currency hasn’t breached 120 since July of that year.

Some $3.01 billion in options contracts with strikes at 120 yen per dollar expire today, according to data compiled by Bloomberg, with a further $2.28 billion due on Dec. 8.

The won dropped to 1,115.55 per dollar as the weaker yen stoked concern Japanese exporters will gain a competitive advantage.

Main Game
The euro slipped to $1.2306 today after touching $1.2301, the lowest level since August 2012, last session. The ECB will leave its main rates unchanged today, according to economists surveyed by Bloomberg.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was little changed after gaining 0.3 percent yesterday to its highest close since March 2009.

“Tonight’s ECB meeting is likely to be the only game in town,” Mark Smith, a senior economist in Auckland at ANZ Bank New Zealand Ltd., wrote in a client note. “While QE at this juncture is probably a step too far, it would be a bolt out of the blue should it occur. Rate hikes look to be a forgone conclusion if the U.S. economy remains strong.”

Bonds in the Bank of America Merrill Lynch Global Broad Market Sovereign Plus Index had an effective yield of 1.37 percent. The figure has been less than 1.4 percent for almost two weeks. It fell to 1.33 percent in October, the lowest level since May 2013. U.S. Treasuries are drawing support because they yield more than bonds in Europe or Japan as the Federal Reserve prepares to raise interest rates.

Aussie Bonds
The yield on Australia’s five-year government note reached 2.487 percent, lowest since Oct. 2012 and below the Reserve Bank of Australia’s benchmark cash rate for the first time since June last year. The rate on three-year notes fell as much as six basis points to the lowest since July 2012.

The central bank will lower its overnight cash rate target by a quarter percentage point in the next 12 months, a Credit Suisse Group AG index based on swaps shows.

The S&P 500 rose 0.4 percent last session to an all-time high of 2,074.33, while the Dow Jones Industrial Average added 0.2 percent to a record 17,912.62.

Data yesterday showed service providers from U.S. retailers to builders expanded in November at the second-fastest pace in more than nine years. U.S. companies added 208,000 workers in November, figures from ADP Research Institute indicated, below the 222,000 increase projected in a Bloomberg survey and down from a revised 233,000 in October. Economists forecast nonfarm payrolls rose by 230,000 employees in November, up from 214,000 in the previous month.

The Federal Reserve’s Beige Book was also released yesterday, and indicated there was “widespread” hiring across districts as the U.S. economy continued to expand.

FTSE Outlook

FTSE 100 Prediction
FTSE 100 Prediction

Support today is initially at 6711, yesterdays low, with 6694 and 6660 below that. Splitting the difference would expect 6675 if the 20 day Bianca channel broke. I am expecting a test of the 6750 area though, and we have a fairly key PRT resistance line here. If this is exceeded then it brings the top of the daily channels into play as we have both the 10 day Bianca at 6769, and the 10 day Raff at 6773. If yesterdays weakness continues then the bulls will, I feel, struggle to break the 6750 area. I can’t see them exceeding the 6796 resistance area today, unless ECB suddenly announce QE or something later that is unexpected. They will more than likely keep rates the same as well. For today I have plotted an initial rise to that 6750 area where I expect we will stall then a dip down to test yesterday low at 6711. The S&P is not far off the top of its 10 day Raff at 2079 so that might stutter there and any dip will be reflected on the FTSE too.

85 Comments

  1. Morning all. I’m still making 00-50. Bid for 2 offer in 1. Aiming to close my final short @6680. Any chance of it getting there before ECB?

  2. For today be warned…or at least be aware…that MR. Draghi speaks, ie ECB

    No matter what’s on offer from ECB, as long as Mr. Draghi speaks, I recon DOW 18,000 and DAX 10050 and FTSE 6800 possible very quickly, hence be aware. To avoid risk I think best not to have any shorts at all now, until after ECB speaks. (This is what’s been happening recently, he opens his mouth and markets fly up)

    Draghi just needs to speak and promise, no action needed from ECB and markets around world will fly up, be prepared, I think some quick longs should make easy money – Agree?/Disagree? GLA all!

  3. It worked quite well yesterday for me, so I’m buying the dips, long at 08 atm, looking to take a profit on a spike to 30ish and replace on retracement.
    I was long DOW last night and watched it closely to the end, it seemed to be very light volume, not very convincing.

      1. I use the RSI as a “spike measurer”, works well in a ranging market, 3min @10, 30/70, just closed the long for me @ 26.

        1. And again the RSI trade delivers, long again at 6709 (30) out at 6724.5 ( after 70) within 20 minutes. Money for old rope lol, give it a try with a couple of quid.

  5. DAX could squeeze a bit higher but already sky high as it is. I’m still a bear even if QE is announced as that’s what the bulls have been buying for! It will just be down to judgement of how many and how high i sell at.

    1. Short DAX @10026 and will be adding either way. Don’t have the time to upload but looking at a comparison 4hr between FTSE, CAC, SPX and DAX, the DAX is trading about 2% above the CAC and 4% over SPX. Lot of money been flowing into DAX last month and start of this but I agree it probably needs to go down a bit.

      also thinking of going long FTSE as a hedge against DAX with super Mario coming up and god knows what that muppet causes the markets to do.

      1. I agree, but Mr. Mario opens mouth and markets spike up, since this morning longs at @9999, with sells at @10020/30, has been easy setups….
        Plan is Mr. Mario speaks, with promises, and markets spikes up, so until then further push upwards…once ECB done then maybe back, depending on announcement. In US they used to say don’t fight the FED, here we will say don’t fight the ECB…:-)

        1. I personally think Mario will keep saying what he has been saying because unless the Germans change their opinion we are not going to see sovereign state bond buying by ECB. there are powerful fractions in Germany that will take court action stopping the Bundesbank from participating as they view this as undermining the democratic principles and sovereignty of the bundesbank (they did this over participation of the Bundesbank in Spanish bailout). Also the Germans think their economy will improve and early signs are that is the case and their stock market is already looking pretty handy now anyway.

          Of course I will be proven totally wrong around 1.30 but I get the idea the ECB will do a half way house, stopping short of full blown QE because it can’t politically and the markets will not like that is my guess…

  8. Saudi Arabia cuts all Jan oil prices to US/Asia – something not right going on – but have no clue of outcome and effect of this.

    1. they are just not happy about shale gas and fracking and trying to get control of that market by running “smallish” players out of the market

        1. Same as big miners like RIO has done to smaller iron ore plays, commodities giants clearing out smaller ones 🙂

  10. Dutch agree with you on Germany & the QE issue unless they can change Germany the full blown QE will not happen as for Germany ecomony they have a lot of problem over there the reason there stock markets is doing so well is because of big american hedge funds buying up… See what happen last time they decide to cash in crashed too 8350.

  11. Did you see that spike DAX to 10076!!! That’s what’s Im talking about – I know BS spike – but I knew it would come. SAD I couldn’t get in a short at @76, as had the sell button, but them numbers just moved up down like maniac! Hope no one got burnt – I am good and ok now 🙂

  12. Got a nice low 4pp on DAX from avrge 10013. Is this the cataylst we`ve been waiting for? Unless US has still got some bull in the locker…

  13. Typical, if you have stops and limits, and not prepared then you are stuffed, say you have a stop at @50 for DAX, you would be out and not its below 9950 even!
    I don’t like this market, but I am glad I waited for Mr. Draghi speech today before trading, there is so much opportunity why risk when there is likely market manipulation? GLA all and stay safe!

  16. Finally level. 00 hit 80 hit.

    +400 points in 7 days trading as a bear in what can be viewed as a bull market. Not bad.

    1. AGREE – 100% – hence my warning since yesterday night on here!, se last post end of day yesterday and first post today!

  21. Down was the only way – look how high all of the markets were/still are!
    Punters had been betting on QE since October and have finally got fed up.
    Like i said earlier even if QE was confirmed i would have still sold and sold a lot!

    1. Probably come down thick and fast, before rallying maybe in a fortnight, can see next week ending negatively.

    2. Markets don’t care if they are high or not. Today it may seem the price is high, tomorrow it will seem the price is low for them. Don’t trust this illusion that the price had enough and soon it will go down.

  26. Ok, DOW holding up, maybe for nonfarm tomorrow…so that will create another spike up to be aware off, level of spike depends on todays actions, still full day trading left in US

      1. I am making money as I am not trading today. LOL (my kind of humor). Who knows what I would have done so decided to do Christmas stuff instead. Don’t like shorting the tops and hate going longs either.

  28. That was a bit of a damp squib, all we did was drop 40 points and partially bounce back, still within the 133 point band of 6640-6773 that we’ve been in for two weeks.
    Buy the dips, sell the spikes intraday, trade it for what it is, a ranging market not a trending market until one of those levels breaks convincingly.

    1. yes, FTSE been slower – or should we say UK has been more sensible 🙂
      Take some points either way and don’t get spiked out

  31. Mlawrence01 – you must be happy today with all those shorts 🙂

    Its like you planted threes few days ago and fruits coming today finally.. 🙂

      1. Finally mali! Shouldn’t be too annoyed that i just missed another at 6710 earlier. Just had to stick to selling with confidence up at these levels and stick to prices and strategy.
        Just need to know what to do based on your own book regardless of the market.

  32. there, closed my DAX short of 10026 at 9835 and have gone long at that level. Sometimes it all seems so easy (until I mess up again of course and waste it all!).

    Happy days

      1. just closed long at 60. nice little earner the dax been, almost 200 points in one trade.

        Think we’ll go lower though. (junk)Bond yields have been dropping fast last weeks and stocks will follow suit. ECB dithering is just an excuse down to have a bit more bear for a classic chrsitmas run to make fund managers look ok-ish for the year if we get back to levels we saw this morning. Can’t see SPX reach 2100 now so DAX is capped at 10,000-10,050 and for the FTSE I doubt it will get passed 6850

  33. Today I have now closed all positions, closed my last DAX @9837. Closed a hanging DOW short from @17830, for 10pnts+, imagine that was almost -100pnts, but held on (yes risky, do NOT do it, with low margin) and got a bit out in the end.
    Made my first 100+pnts on DAX today after 2wks of only few pnts here and there.
    Now need to take timeout so I don’t mess my winnings – over trading kills too. GLA and have a good evening and speak tomorrow 🙂

  34. Bulls are hurt now. Will they come back any time soon?
    I was making 60-10 but removed all orders. Been a bear all this time and then the second i go long it will probably get hit on the head hard.
    God knows how Asia will react over night… They’re the last ones standing..

    1. New highs again, crazy isn’t it? Americans are scared to short after the 2000 point bear trap. Bet it’s very light volume again.
      Dragged the FTSE up to 6720 though, if anybody wants to sell?

  40. Amazing Draghi make his statement at 13.30 by 17.30 ECB make a different statement…. They are a joke and that is why the europe is in the current state because it’s run by idiots. there about as much use as a chocolate teaspoon!!!

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