Support at 6861, then 6825, Resistance 6880, 6896

Good morning. Well that was a rather annoying stop out yesterday at 6836 as it sure enough did bounce to target at 6870 after all. I know a few held as had lower stops so that was good, at least some of us benefitted from the bounce! Still, at least the 6875 short came good, closing fully at 6840.

Yesterday, the World Bank cut its global growth forecast amid weaker outlooks for the U.S., Russia and China, while calling on emerging markets to strengthen their economies before the Federal Reserve raises interest rates.

The FTSE closed slightly above it open yesterday, whilst the Dax, once it climbed to the 10030 area, stayed pretty flat for most of the day. The S&P levelled off around 1950 and also didn’t really do much. Pausing for breath or turning over? With the absence of any dip off 6870 yesterday I think we may see a push higher before another dip – opposite to yesterday really.

Asia Overnight from Bloomberg
The euro fell against most peers and Australian bonds followed Treasuries lower before a sale of 10-year U.S. notes. Japanese stocks rose, with the Asian benchmark equity gauge near a one-year high, and nickel fell.

The euro weakened 0.1 percent versus the dollar by 2:12 p.m. in Tokyo, falling against 15 of 16 major peers. The yield on 10-year Australian notes climbed seven basis points after the rate on equivalent U.S. Treasuries hit a four-week high. Japan’s Topix added 0.6 percent as the MSCI Asia Pacific Index extended its highest close since May 21 last year. Standard & Poor’s 500 Index futures fell 0.1 percent. Nickel slid 0.6 percent and platinum retreated 0.4 percent.

U.S. 10-year yields rose before the sale of $21 billion of the securities today, boosting the allure of the dollar as European Central Bank cuts rates to stave off deflation. The World Bank cut its global growth forecast to 2.8 percent, citing weaker outlooks for the U.S., Russia and China. MSCI said it’s no longer considering reclassifying South Korea and Taiwan as developed markets and won’t induct mainland China-listed shares to its emerging-markets gauge.

“The latest comments from ECB policy makers imply they are biased towards easing and remain cautious about the impact of the euro’s strength on inflation,” said Kengo Suzuki, the chief currency strategist at Mizuho Securities in Tokyo. “The euro is likely to break below $1.35 as we continue to see U.S. yields higher as a recovery in the U.S. economy continues.”

World Bank
The euro bought $1.3522, the least since it fell to as low as $1.3503 on June 5, the cheapest level since Feb. 6. The joint currency fell 0.3 percent, a fourth straight decline, to 138.30 yen. The currencies of Norway, Denmark and Switzerland also slid against the greenback.

New Zealand’s dollar advanced against all major currencies, adding 0.3 percent versus the dollar and 0.4 percent to the euro. The South Pacific country’s central bank will lift the official cash rate to 3.25 percent tomorrow, according to 13 of 15 economists surveyed by Bloomberg.

The World Bank’s forecast for 2014 was reduced from a January prediction of 3.2 percent, with the projection for U.S. growth cut to 2.1 percent, from 2.8 percent while China’s was lowered to 7.6 percent from 7.7 percent. The economy of Japan, Asia’s second-largest, will probably expand 1.3 percent this year, reduced from a previous forecast of 1.4 percent growth. The euro area’s 1.1 percent projection was left unchanged.

Japan’s Topix (TPX) rose after dropping 0.5 percent yesterday, the steepest one-day decline since May 19. Hong Kong’s Hang Seng Index slipped 0.4 percent after yesterday erasing its decline for the year. A gauge of Chinese companies listed in the city retreated 0.2 percent and the Shanghai Composite Index dropped 0.3 percent.

U.S. Stocks
Yields on 10-year U.S. Treasuries rose one basis point to 2.65 percent after climbing four basis points to the highest close since May 12 in New York. Data yesterday showed U.S. job openings and wholesale inventories topped economists’ forecasts.

The S&P 500 was little changed at 1,950.79 after closing at a record the previous four days, pushing its valuation to 16.5 times projected earnings, the highest multiple in four years.

“This is a temporary reprieve from a market that’s been seeing highs,” Chad Morganlander, a fund manager at Stifel Nicolaus & Co., which oversees $160 billion, from Florham Park, New Jersey, said by phone. “It shouldn’t be a shock to anyone that we’re seeing softness after a blistering recovery.”

FTSE Outlook

FTSE 100 prediction
FTSE 100 prediction

Despite the pause in the climb to new highs, we have crossed back to above the daily pivot which is 6861 today (not that far below where we are as I write this). As such that could be initial support and the absence of bears at 6870 resistance yesterday makes me think that we might try for 6900, if the bulls can break the 6880 level which seems to be holding them back at the moment. Below 6861 we have support at 6825. Bit frustrating to get stopped out on that long yesterday but nature of the beast.

We have the Bianca channel tops at 6893 and 6896 today, slowly creeping up each day, so that area should be worth a short, later on if we get that high.

So, today I am thinking an initial rise to that 30 minute channel and the glass ceiling area at 6880, dip to the pivot at 6861, then a rise to 6900ish. Might tally with the Dax hitting 10070 and S&P hitting 1956.

32 Comments

  1. Nearly hit b/e on my Dax short. Amazing what 12 hours does. bo doubt it will pop back but holding firm

  2. Thanks Belly, yes made sure I had a Gelato everyday, goods times with the kids at Tuscan seaside and finished off in Florence staying with relatives.
    Did you have some good runs in last 2weeks?

  3. Was too optimistic today! Went short last night at 6868, closed it at 6865, doh! FTSE too slow to follow the arrows as had the down from 6870 yesterday. Support 6825 now…

  4. Closed my short same time as you Marco. I had some really good runs in the last couple of weeks. I also made a couple of stupid mistakes too. I was on Greece for a few days too so that was good to have a couple of days off

  5. Yes I did thanks Nick, good to be back and thanks for the charts.
    Belly I feel it will come back to pick us up have an order in at 6825.

  6. I have an order in for 26 but not sure if it’s going to drop that far gain before a big rally

  7. Belly looking at the 4hr chart on FTSE I would say she needs to touch that 200 ma line which is 6826 before bounce up

  8. Just sold my DAX short, at a loss but wow so much better than last night! Powder dry for now but will short DAX over 10,000 if we see it again.

  9. Don’t know where this is going tbh.
    Only know that I think the worm started turning? It’s a shame, cause I was hoping for it to do so next week only 🙁

  10. Belly I have closed taken 11 pts on FTSE and 10 on Dow as feel it will drop back down might be wrong

  11. Suggested yesterday that Dow/1 hr. was exhibiting a good mix of conditions for a downswing. This is still the case, and downward bias seems to have taken some sort of hold. Growth might rally a bit later today, but that variable is now firmly in negative territory for the time being. The index could lose around 200 points without the current strong uptrend being necessarily threatened.

    http://i1348.photobucket.com/albums/p736/jmca01/WallStreetDFB_zps20083a8f.png

  12. If we touch 6820 I will go long for a few otherwise yes Belly been a good day don’t want to spoil it

  13. Finally a decent down day…..but the question is if it will be followed up another couple of solidly down days to end this week? This moribund tight range between 6800 and 6875 has strangled the FTSE for coming 6 weeks now.

    Still a difficult market to call as always. Just when you think it will get to 6930 it falls and when you think it will finish below 6795 it rises. Great for day trading I’m sure…..doesn’t matter what you do…buy or sell….doesn’t matter what level you get in at….almost certain to make money…or at least that’s how it looks from the outside!

    Anyway I’m expecting / hoping we will get more missed estimates as Q2 results come in….and finally the FTSE begins its gradual decline through June and July.

    GLA.

  14. Tomorrow might see another -100 of DAX 🙂 hopefully with that 10000 hit we might those buyers panic offload

  15. I think the big question now is whether the FTSE will break below ≈6800, escaping the tight range mentioned above by Javed. Looking at the daily scene, my hunch is that it will drop below that level.

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