FTSE100 - Daily Analysis

[Guest Chanakya]

I would like communitiy members to share chart analysis for FTSE 100. I trade FTSE100 daily and will be posting my analysis over here regularly.

 

@ Moderators - please advise if this Ok to do it or not?

 

Best Regards

[Guest Zero]

Hi Chanakya 

 

Great.  I'm interested - I watch the FTSE open after the ASX and it will be nice to wake up the next day and have someone give a few lines on what happened while I was sleeping. 

 

While I am no moderator, I doubt there will be a problem.  I started a similar thread for the ASX and was fully supported - so go for it I say.

 

Thanks.

[LukeM]

Morning , I think this is a great idea! It's definitely something we'll support, thats exactly what this Community has been built for!

 

 

[LukeM]

 Just a little thought to give you a helping hand... once you start posting some of your analysis up here, what we'll do is feature the board on the Community's home page so that everyone can see it and contribute with you. 

 

Hope this helps get the board up and running!

[Welshman]

Nice one Chanakya,

I've started to follow FTSE recently and will be happy to share my thoughts

[Mercury]

Luke,

 

I can post analysis on the FTSE today if you can tell me how to attach chart picture files?  I use the ProRealTime tool, charts save as a PNG image.

 

Regards,

 

AR

[Welshman]

Hi Adrian,

 

To upload a chart from PRT simply save the chart in PRT, hit "REPLY" here in the forum and  click the icon to the right after the link option . when you hover over the icon it shows  "insert/edit picture" select that and you can choose the location from which you can upload your chart,

 

Hope that helps

 

looking forward to seeing your charts

 

[Mercury]

Ok thanks Welshman,  Let's give it a go (though it might be hard to view them on the post, it would be better as an attachment)

 

As a new member I will first outline my analytical method as this will be necessary to follow my chart analysis.  I use the following to triangulate trade entries:

 

1. Tramline (TL) pairs that show lines of resistance and support along a trend - if a trend is applicable – also triangle formations and head & shoulder necklines where relevant
2. Fibonacci (Fib) retrace lines - especially on counter trend rally/pullback – and particularly look for intersection of Fib lines and TL lines as high likelihood turning points. Fib 50% and 62% are the usual turning points but in some markets at certain times 76% and even 82% can come into play (e.g. Dow Jones of late)
3. Elliott Wave (EW) counts - 1-5 on motive waves with the main trend and 1-3 (or A-B-C) of counter trend moves (see labels on charts attached)
4. In addition I use Momentum, Stochastic and RSI to support the first 3 methods in identifying turning points – especially seeking so-called divergences (lower price but higher momentum is a positive divergence and the reverse is negative)

 

Overall I seek to identify turning points, often contrarian in stance, using the above plus Commitment of Traders data where relevant.  I also look at 3 levels of price data starting with Weekly then Daily and finally Hourly.  Occasionally I use 15mins if I really need to hone in and clarify the Hourly chart but this is more risky in my experience.

 

 

As to the FTSE, my current view is that the bull market is over (was over last May 2015) and the bear has begun but is only in the beginning stages.  Under EW theory the FTSE has completed the first of 3 major waves down and in addition has also completed the first of the third major wave (which is also composed of a 1-5 wave count).  We are now in a retrace off the recent low hitting in the region of the 62%/76% Fib resistance levels.  If these hold as resistance then the next leg down is due soon and it will be a big one!

 

On the weekly chart you can see the whole of the move up from the 2009 lows, which describes an A-B-C retrace pattern to the May 2015 high (Purple labels).  If this is correct then the most likely next major move is a 1-5 motive wave down, which we have had the first leg of and have commenced the third (Wave 2 being a counter trend rally back up).  If true the bear could take us below the 2009 lows.

 

On the Daily chart you can see the first drop (Purple 1) and counter rally (Purple 2), which poked above the 62% Fib and then turned back down to complete wave 1 of wave 3 (Pink 1).  We are now in a retrace of that move with positive momentum divergence (see green line on momentum indicator) at Pink 1 supporting a strong rally.  Is that rally now running out of steam?  Currently the FTSE is showing negative momentum divergence building (but is it completed yet?), high Stochastic and high RSI.  There is also resistance on the red downward tramline but price is in between the Fib 62% and 76% lines (not ideal, would prefer it to have nit one or the other and stuck).  However the shape and strength of the rally suggest it is running out of steam and will either turn now or hit the 76% Fib and turn then (I expect this will resolve this week, maybe after the FOMC rate announcement on Wednesday).

 

Zooming in to the Hourly chart I see two possible scenarios:

1. the rally finished Mar 5/6 and will now drop in an A-B wave before a final rally back up to the 76% or thereabouts before the big drop, OR
2. the rally has one more leg up to go to complete an A-B-C counter trend move and then the big drop will begin.

 

In either scenario there will be a sharp drop in the near future followed by a strong retrace (or further leg beyond recent highs) before the main drop will begin in earnest.

 

There have been a series of Neg Mom Divs in this rally but notably this time there is also a significant Neg Div on Stochastic.

 

My trading strategy in this is to take a position short the FTSE100 with a stop above the recent high and if I get stopped out try again near the 76% Fib level, assuming no major change.  After that I will need to reassess to try and decide which of my 2 scenarios is in play and act accordingly.

 

Note I also compare the other major indices (S&P500, Dow, Dax, Japan225 and Russell2000) and I see a similar picture.  I think the US markets are the ones to watch to try and mark the final turning point.  In addition I see Oil as being a major market driver at present and Gold as a resultant market in fight to and from safety so check these two to try and confirm my hypothesis.

 

Sorry if that is all quite ling winded but I am not sure if others use EW, Fibs, TLs and Mom Divs in this way.  Basically I am targeting the red circle area for a short and the Green for a long.

 

Look forward to your comments (positive and negative).

 

AR

 



[Guest Chanakya]

Sorry guys I have been busy with some other bits and pieces hence away from trading but will be back from Monday next week to start sharing my thoughts.

 

 - Amazing stuff, I am not that experienced in trading though I do have a plan/trading method which I follow and will explain in my next post.

 

Secondly I was wondering if we can also post S/R levels which may help community members on a daily basis. Btw I use 5 mins timeframe to trade via PRT.

 

Regards

[Mercury]

Is the FTSE100 approaching the moment of truth?  The US markets have been ridiculously strong, it can't last, and now the FTSE is following, having been sluggish for a few weeks BUT is that a last gasp of a dying man for the FTSE (and other indices) or are we witnessing the continuation of the most phenomenal rally on to new all time highs?

 

If the FTSE is to turn it should be now (today/Monday or over the weekend).  A Triangle has formed on the hourly chart close to the Fib 76%.  In my experience when a market gets beyond fib 62% anything can happen and certainly we don't need to get a hit on the 76%, it can fall short a lot.  I am predicting a final touch (+/-) on the upper Triangle line to complete a valid A-B-C retrace rally and then let the fall begin (wont be that dramatic to start with but let's see it it turns before thinking about that).

 

I think we will see something similar in other main indices: Dax and Japan have already run weaker (see separate posts) and Hong Kong was also weaker last night.  Only the Yanks left to realise the game is up and they are overly optimistic by nature...

 

Previously I was unsure on Wa vs Wc but now that most indices have run up to strong full retrace points I think this looks like a very strong counter rally without a significant A-B phase.  Additionally I was tracking a similar A-B-C on Oil, which looked like a Wa and Oil appears to be the main overall market driver at present but now I have a viable A-B-C on oil too (see separate post).  Gold has turned bullish again, another good sign that the Indices are set for a drop perhaps?

 

Of course this could all got the other way, such is the nature of the beast, but overall I'd say we were at least due a significant counter trend drop on indices and Oil and it could very well be the end of a retrace rally preparatory to a big bear.  time will tell...

 

Here is the hourly FTSE chart, please do comment back, especially if you have an alternative view:



[Mercury]

Update on the FTSE.

 

The US markets have been very buoyant and holding up the other major indices, I believe.  The Dax, Nikkei and FTSE in particular have been more bearish but now the Us markets could be about to turn (see Trade of the Day post).

 

I think we are also seeing a major turn on Dax and FTSE, the latter of which has also been benefiting from commodities relief rally with a higher proportion of Oil and Miners than other indices.  To me commodities look set for at least a pull back if not yet another leg down (my medium term prediction).  The FTSE is near 76% Fib on the Dec drop and a strong tramline resistance with negative Momentum Divergence (also on the hourly).  There is a chance it could pop up to my red line, which is 50% Fib off the all time high, but I think this all depends on how the US markets and Oil do.

 

Here is the chart:

 

[Guest Chanakya]

 - Many thanks for the analysis on FTSE100, amazing stuff. As previously mentioned I am novice and I play a small timeframe - 5 mins.

 

My rules of trading are simple:

 

1. Support & Resistance - Minimum of 2 or more making it a zone.

2. I use certain types of Signal candles reacting from my zones which defines my entry and exit points

3. My target is 20-30 points per day if possible

 

I completely agree that FTSE has now traded sideways for last 2 weeks approx and I see a lot of resistance - 6220-230 area and support between 6110-120.

 

 

Here is one of the trades I took:

 

[Mercury]

Chanakya

 

I used to trade on the 5min too but couldn't make it work consistently and found it too all consuming, constantly watching each 5 min move and jumping at shadows.  I always seemed to be missing the bigger picture long term trend.  Now I prefer to take bigger picture, longer term trades and let them ride for longer taking many more points (usually minimum 250 point but no max).  Right now I am stalking what I think could be a massive bear and I'd want to be in that for the whole ride (that's 1000s of points).

 

This morning the FTSE broke my potential ending Triangle in a big way.  The break of such a formation is a great place to take a trade (I am short at 6115 with a generous stop to allow this room to develop and also short at 6231 with a tight stop, where I judged the top of this rally to be).  These sharp breaks have a habit of retracing significantly and it is not unusual for a second touch on the lower Triangle line (i.e. above my second short position), which is also a great shorting opportunity.

 

My plan is to take another short if this happens and ride at least 3 down on what I am anticipating will be a relatively short drop (a few days, maybe a week or so).  After that, depending on how the drop goes (how strong, how far it goes, how long it takes and so on) I will reassess to decide if we have indeed had the top of this rally or if there will be another leg back up to a new high.  At present I am leaning towards the former but we should still get a significant relief rally, which would offer a chance to take profits on most of the shorts I currently have and get into new ones when the overall direction is confirmed.

 

Here is the chart:



[Mercury]

Touch and go on the FTSE?  As per this mornings post thee FTSE has now come back to touch the bottom Triangle line, having recently broken it.  This can happen twice so I'll be watching the US markets this afternoon to see if there is something similar occurring before committing but not a bad place to chance a short on the FTSE.

 

Chart:



[Mercury]

Following on from yesterday's post re Triangle breaks and kiss backs my analysis shows a second kiss on the lower Triangle line.  This is a very strong signal for me of an impending drop and I am Short at the second kiss.  If price does rally up from here then something very different is happening in my view.  This Short position is supported by weak US futures actions and also weak Nikkei over night action after a double kiss last night (I am Short there as well BTW).

 

The only flies in the ointment that I can see are: Dax is quite buoyant this morning and hit a higher high, thought that may well be running out of steam as I write, and Gold is Bearish, though hitting support at the bottom of a Triangle just now.  Gold can go down with indices of course, though not ideal and the Dax can go its own way behind QE and NIRP but I expect all global indices to track each other so keeping stops close on this until I see how the US opens.

 

As always, love to hear comments, especially if you disagree!

 

Here is the chart:



[Guest Chanakya]

Todays trade:

 

Type: Sell bet

Entry: 6114

Exit: 6096

Pips: 18

 

[Guest Rich88]

Hi guys, love reading all your thoughts on the ftse

I think last week the ftse put a mid term top in at 6237

With 6220 being a tough resistance, I think a break back below 6150 will make way for a move to the lower 6000s over the coming sessions

[Guest Rich88]

Look for short at 6150. Target 6080

[Mercury]

Hi Rich88,

 

Too short term for me so maybe some others can comment for you but as for me the only thing driving the FTSE today is the US market.  What do you see on the US?  I would be a bit wary about placing a trade before we see the mood when Europe wakes up tomorrow and perhaps what Asia does tonight but in general I thing the trend for the next few weeks is down.

[Mercury]

Does this early price action have the making of a "red" day?  Price has poked up near the 50% Fib (18 Mar high to 24 Mar low), together with gathering lower lows and lower highs, negative momentum divergence at the key turning points and strong upper resistance it all looks to me like it is keeling over.

 

Time to chance a short?

 

Here is the chart:



[Guest Rich88]

Strongly bearish on the footsie, as long as we stay below 6150 i see a move to 6020 coming soon.

On the Dow im short term bear, i think we are due a pull back but with yellen, oil and March April being bullish months then i think the dow wil see saw around 17300 - 17600 who knows!

[Mercury]

Hi Rich88,

 

Interesting!  Yellen, Oil, bullish months!  What are you thinking behind this?

 

I think we have seen solid correlation across all the major stock indices with subtle differences for index make up. ironically the Nikkei and the Dax have been weaker with very similar chart profiles despite continuing QE and NIRP (or maybe because of this?).  The S&P500 and FTSE are similar (if you factor in the FTSEs high proportion of mining and oil).  The Dow is an oddity because it is made up of a small number of big blues so could diverge from the rest but if we are indeed in the grip of a bear I doubt it (or at least it will be a short lived jump to big blue alleged safety).

 

Oil and indices have been correlating of late but that isn't a continuous thing.  Oil dropped hugely over the past year or so with indices remaining largely unaffected, but where Oil and commodities lead stocks are sure to follow eventually I think...

 

Not sure I really buy into seasonality in markets as such (with the possible exception of the Santa Clause rally) and you have to compare apples to apples (i.e. does the same seasonality occur in a Bear as in a Bull?)

 

Interested in your thinking.

[Guest Rich88]

Lately equities have broken off a bit from oil, but with oil retreating again let's see if selling picks up and equities go along with it.

My main thinking is for now the VIX will stay low and US stocks will chop and the real selling will come in may/June

[Mercury]

Ok good but I guess I am interested in the reasons for your thinking.  Why will Vix stay low (though I must say I think the Vix is more a lagging rather than leading indicator here, I do watch it).  Do you track US Gov 10 year yield?  I think that is a bit more leading, although these days with interest rates so low, who knows.  Why will May/June see selling, is it the "sell in May and go away" adage?

 

BTW, I tend to agree with you, although I do expect a first bout of selling off against the recent rally gains during April with a retrace (quite possible a strong one) into end April/May and then either a push to all time highs or the sell off you are think of.

 

Cheers,

 

M

[Mercury]

FTSE just made a fresh lower low on the hourly chart.  I have a valid (I think) EW1-2 (1-2) setting up for a strong W3 down.  Could get a small retrace yet as the US opens but otherwise it looks set for a significant drop from here.

 

Anyone disagree?  Please shout if you do.

 

Here is the chart:



[Guest Rich88]

If we break 6070 then a move to 6020 is expected

[Guest Rich88]

Still bearish below 6150

[Guest Rich88]

VIX can go lower then higher, Dow more gains then lower?

[Mercury]

That American stock markets are overly optimistic places is evident in yesterdays response to me, really no news at all drove this when you think about it, just some of the usual Fed bull (pun intended...).  What is encouraging for this thread is that the FTSE100 seems to be diverging from the US markets.  The Dax may be as well and and Japan is decidedly bearish (interesting when you think that a lot of investment advisors tell you to invest in Japan because of QE!) also Oil and US markets are no longer correlated (if they ever really were...).  That said it is hard to totally disconnect the influence of the US on world markets...

 

Still looking at the FTSE without worrying about the US I would say we are still in an overall downward move.  Price is currently at the Fib76% and resisting but a break of this and, obviously, a fresh high on the rally from 11 Feb would suggest at a minimum another leg up on the rally (as with the US).  Note the Dow is getting close to eclipsing the Christmas high (only 100 points in it), if that happens then the new all time highs scenario comes into play and I can't see the FTSE/Dax resisting such a move.  The next few days should shed some light on this.

 

Right now I would be comfortable taking a short on the FTSE at the 76% fib, which also coincides with my down-sloping daily chart tramline (red line) (it doesn't map accurately on the hourly chart on PRT for some reason) but keeping stops close.

 



[Mercury]

I may be clutching at straws here but there is a remarkable symmetry between the 2 charts below.  One is today and the other is from November (week 1).  The pattern is almost identical and in November week 1 we also had a Central Banker speech on Tuesday (Draghi this time instead of Yellen but does it matter?) followed by ADP on Wednesday and NFP on Friday.

 

Could history repeat itself?

 

Charts: