FTSE100 - Daily Analysis

[Mercury]

Hi Rich88,

 

I see it a bit differently.  I see a classic small 1-5 downward move, which should hopefully be followed by an A-B-C retrace before a further bigger move down.  We are at a resistance point just now but I can see another leg down to maybe 2210-20 (strong support/resistance zone - more easily seen on the 4 hourly chart).  Mining rather than Oil seems to be the main driver down just now and I believe Oil will move up another leg to about 4700 (Brent) before deciding its next move, likely down).

 

So net my thinking is further softness this morning to complete that 1-5 wave down then a retrace, possibly triggered by the US markets before a major drop.

 



[Mercury]

Recent price action makes me think that the wave 1 may already have completed and now the market may be approaching completion of wave 2 retrace.  There are signs of a turn (high Stochastic/RSI after a Neg Mom Div) and a touch and rebound away from the 38% Fib, near some strong resistance.  The EW count works 1-5 down, followed by an A-B-C back up.  In addition the market is finding resistance on a decent set of parallel tramlines with a potential Tramline break and kiss back set up.

 

There are similar set ups on the US markets and Dax but not the Russell, there the market is at a potential top.

 



[Mercury]

Lower low achieved on FTSE 100 (and Dax but the FTSE is the important one).  Watch US markets for same.  This now completes the 1-5 down followed by A-B-C retrace up and turn I was tracking.  It took the BoJ overnight to trigger it but c'est la vie.  Good shorting opportunity at the 62% and 50% fibs on the main indices overnight.  If you didn't get in at those points then look for the next retrace.  This current move should be a Wave 3 but can put in a quick mini wave 1-2 retrace early in the move.

 

Once again the market has offered up a nice tramline break and multiple kiss back on 2 tramlines, this proved them as valid for me.  now with the new lower low the bear is on.

 



[Mercury]

Whew!  Is anyone else feeling a little neck-sore with whiplash on these stock markets?  Quite a day of volatile reversals yesterday, especially on US markets.  Now I don't know about you but that is suggestive of uncertainty to me and an indication of a trend change (basically a struggle raging between Bulls and Bears and you don't want to get caught up in that!  Sheep!)

 

I was feeling like the move down was strong until the US opened and now I am suffering the same indecision as the market so I went back to my FTSE analysis (let's leave the US for now) to see what I could see.  The big issue for me was putting the recent strong rally into the contest of the overall picture.  It is not a classic move but I think I have teased out a structure that makes sense (watch out for Bearish Bias here...)

 

The rally up from Feb is in an A-B-C with 1-5 count on both Wave A and C.  The B is not deep, which is suggestive of a strong rally but experienced commentators have said that a Bear counter rally can seem stronger than a Bull rally so...  Neg Mom Div is strong on the Daily and Stochastic and RSI came out of over bought at the 21 Apr peak.

 

On the Hourly I have a 1-5 down to a small wave 1 and we have just had the A-B-C back up to Wave 2 (green labels).  There was strong Neg Mom Div at the 21 Apr turn that is still in operation I think.  2 sets of tramline breaks and Kiss backs and now a Wave 1-2 move (brown labels) yesterday with turn at 88.6% Fib and resistance line.  Unlike the US the European markets did not make a new lower low (irritating as that would have clinched it for me) and this got me thinking about an A-B-C but I think this is a red herring and prefer the small scale 1-2 (Grey labels) as a set up.  So I am forecasting a turn back down at the Fib 50% or 62% off yesterdays second turn (Brown w2 - I haven't shown the Fib on the chart as I have it on my 15mins) and somewhere inside the resistance zone described by the red lines (plus or minus a bit).  I suppose we cannot rule out a very strong retrace, which has been a feature of the current market (regularly making 76% and even 88% fibs).  Watch and take your best guess on turning point but turn it will I believe.  Another good point to enter short would be a break of the lower tramline.

 

anyone see it differently?

 

 

[Mercury]

Sorry wrong charts

 



[Mercury]

Wild volatility on the FTSE!  Last of the bulls getting cleaned out?

[Mercury]

Sorry, meant to add, is so, watch out for long covering (stops take out plunge!)

[Mercury]

Is it me or does anyone else think the after hours rally on the FTSE100 is way overdone considering a relatively paltry rally (if you can even call it that) on US and DAX?  It just doesn't look right!

[Guest MrJake]

If we look back over time there is this normal flurry when trades are "tidied up" and frequently there is an opposite reaction within the following hour or so. See last night for example

[Mercury]

Fair point, especially at a long weekend, still didn't see similar on Dax and you have to wonder at so much buying just before a long weekend in the UK with the US markets fairly caning it down and Oil twitiching.

[Guest MrJake]

Another thing to look at is the activity on Gold. This increased by 2.25% earlier and only dropped slightly since

[Guest]

You have to keep an eye on Ft at the moment, what with all the terror threats around and Brexit issue, just look when Brussels terror happened, the FT went down a fair bit when the news came out, 

[Mercury]

 the challenge is, does Gold drive the stock markets or the other way around?  Sometimes they move in opposition and sometimes they move in concert, hard to know which in advance.  Best to analyse each independently and only then look for any potential correlation but don't bank on it happening all the time.

[Mercury]

Not sure I agree , I meant I get you but I think such things generally inject only short term volatility.  Important if you are a day trader but what can you do with this?  Once the news hits the market reacts and the pros react much faster than we can so...  Only a major catastrophe can change market sentiment in my view, I mean why would a bomb in Belgium impact global markets?

[FiringSquad13]

Bullish trend still showing but I think we could see a pull back in the short term towards 6100. I think we will see some big moves across the index getting closer to the EU referendum. A busy ahead with earnings releases could also make things choppy.

[Guest MrJake]

Mercury I agree with your comments regarding Gold, it was just a "Glancing Observation" and as we know the market does some strange things. I think I should have bet on Leicester :-)

[Mercury]

EU ref is a distraction for me and still too far off to worry about.  By June 23 I expect global forces to have a firm grip of markets (my view to the bearish side but who really knows).  This is a much bigger factor than the EU Ref.

[Mercury]

Wow when technical analysis works it really works!  And when it doesn't I have to assume I have got it wrong rather than the method is wrong as it usually becomes apparent where I went wrong after the fact.  My only error on this market of late was expect the turn too soon, should have known that Fib 76% or 88% was more likely in this market.  Not sure that will hold true from here on in but that is a topic for another day.

 

I just wanted to share this chart with you guys.  Since the ending Triangle break we have had 3 tramline breaks and kiss backs (the middle one being a double kiss).  The EW count works well with a small 1-5 down to Green 1 followed by a retrace to the 50% fib and resistance line and then another 1-2 of wave 3 (2 turns in the resistance zone before a straight strong drop to thee next tram.  These trams are proving very accurate and one might be forgiven for expecting yet another break and kiss back but I don't think so.  Once the Wave 3 gets going it will not retrace very strongly and the current bounce off the lowest tram is likely to be the last for a while so this time I an anticipating a fast drop through the tram and away down.  The break of the lowest tram is a good Short point in my view.

 



[Mercury]

A little sideways drift early this morning on the DAX, which can't get past my tramline to the upside (Bearish indicator?).  The FTSE 100 did spike a new lower low, showing the direction of travel?  I think the FTSE has shown us that these markets have entered a Wave 3 of 3 down, which should be a strong move down.  If that happens we would then get a retrace (relief) rally before the final move to conclude this wave before a stronger rally back up (NFP triggered I wonder?)

 



[Guest Rich88]

Ftse could be a buy at 6050?

[Mercury]

 can you explain your reasoning?  Is it just support line?

 

For me there is a clear congestion zone and 2050 is about the bottom of it so if the support area holds then a rally from here is possible, how long and how strong I couldn't say just yet.  There is Pos Mom Div building but not yet confirmed and NFP could be the catalyst for a rally for sure but also could be the reverse and a catalyst for a further drop.  For me the US markets have not yet dropped sufficiently in this move, could they be due another drop?  Could this coincide with another rally leg in USD?

 

It is all too unclear to make a clear trading decision just now, I will be clearing anything too close to the congestion zone and waiting for a confirmed breakout after NFP volaitility settles into a set direction before entering again and stop protecting my higher shorts for profit (got to keep ticking over).

[Guest Rich88]

I'm still quite bullish about the market at the mo. Obviously we need to get non farms out of the way first, but I don't think this will decide the mid term direction. Worst case sinario would be a boring figure (200ish) lower could confirm the bearish bias. My thinking a bounce in equities/oil for now then a retrace at the end of the month moving into June. Brexit would help this.

[Mercury]

The bounce is what, to new highs or just a retrace and then drop?  I think you showed the latter on one of your charts, which I would read as a Bearish view (short term bullish maybe) is that right?  I don't see Brexit as a factor (maybe only for GBP temporarily).  the FTSE100 is much more influenced by global economic factors, exchange rates and commodity prices than local politics in my view.

[donaldprice]

The FTSE 100, is mostly dominated heavily by mining and oil companies, therefore if those sectors are down, it will heavily impact on the FTSE100. In relation to the US indices, their has been heavy skepticism of the value of SP500 and DOW jones, being heavily overvalued. However i still advocate that trends can only last so long and therefore always best to revisit those weekly, montly charts. The FTSE100 is overall on a downtrend and it will take one almight push through the daily tramline to see a complete opposite scenario.

[Mercury]

I agree, although I do anticipate a significant retrace before a longer drop.  The bigger picture tramline pair you have drawn allows lots of room for such a retrace, which would be EW1-2 and could go back quite a way.

 

My strategy is to swing trade this move down and then back up and then seek a longer term set of Shorts for a massive wave 3 to come, while guarding against the alternative scenario of new all time highs, which can't be fully ruled out even if we think it not very likely.

[donaldprice]

Because current price action is bang on the tramline and is now heading north, as you say would be the opportunity to just sit and wait for this opportunity, unless you have already joined earlier in the week of course, but other wise good opportunity to grab this indice by the horns when it hits the 50% retracement level of which if confirmed W2 complete, W3 to follow.

[Mercury]

When it turns yes but I am not yet sure we have a Wave 1 (Daily) completed just yet.  It could be but I'd have expected a longer drop on US markets in particular.  I would need to see a tramline break and confirmed bounce off current congestion zone to be confident in the W1 turn.  If the markets move back down through the congestion zone a further drop is firmly on the cards before any retrace.

[Mercury]

FTSE100 has made a small scale retrace to my tramline for a Kiss but is now closed for the weekend so over to the US for the remainder of the evening to decide whether this is a larger scale turning point or just NFP driven small scale retrace.

 

Lots of volatility still out there and too soon to call the post NFP trend direction for me.

 



[Guest Rich88]

I'm short term bullish at the moment, last week's bear rally looks like it has finally ended, but I still see a possible retrace from 6050 support what didn't break today

[Guest ChrisB]

Looks like the buyers are back in charge for now, 6100 area held and with US markets recovering too we could see another try at 6280 or higher?