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FTSE100 - Daily Analysis


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Hi  I don't know anything about Vs so can't really comment.  You chart did remind me that I wanted to relook at the FTSE100 in the context of US markets achieving new all time highs and to try and make better sense of the moves on the FTSE 100 since the 2015 highs.  It has always bothered me that the moves had not fitted into any obvious pattern, being a bit choppy as your Vs demonstrate.

 

Looking again at the big picture charts I am much happier with a count to the Feb 2016 low as a large scale wave 1 rather than assuming we are already into a wave 3.  That would mean mean the current rally is a wave 2 retrace rather than a motive wave up to fresh all time highs (note: this may well not be the case for the US markets, in fact almost certainly they are in a motive wave up to all time highs).  However the recent retrace highs, that initially looked like the Wave 2, is more likely to be a Wave A of the A-B-C retrace because that wave fits a 1-5 profile better than an A-B-C.  That would mean the move down to 15 June low was a Wave B and now we are in a Wave C, which is usually a strong wave, as we have seen so far.  I expect a retrace of the initial move up to complete a 1-2 pattern followed by a strong wave 3 up with the wave C completing in or around the monthly resistance level of 6750, which coincides with the Fib 76.4% off the all time high in 2015 and a possible touch on the Weekly tramline.  Whether the small retrace happens before or after the Brexit results we shall have to wait and see.  Getting in coul dbe  a bit tricky around Brexit of course.

 

 

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Big IPSO/MORI referendum poll out today (release time unknown). FTSE down in early trading from 6285. Strong remain poll vote could see a move up to test the monthly resistance level of 6375. A strong leave poll vote could initiate another big move down through support at 6200.

 

 

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It could go up or it could go down, no question.  If you are day trading then I fancy we may see a bit of risk being taken off the table as the vote/results loom and doubts set in.

 

If hedgeye.com is correct about Remain being priced into GBP (don't know how they know that or think that other than judgement but on this topic for sure they are closer to the market than I) then it could follow that it is also priced into the FTSE.  As such a Remain result should not move the market too much, a bit of a relief rally perhaps, and then a return to the big picture trends.

 

Obviously a Leave result would most likely have a big impact to the downside.

 

The the polls neck and neck it seems like the markets are siding with the bookies rather than the polls and assuming that fear of change and "better the ***** you know" sentiment will win out.  the contrarian in me wants to go the other way but with neck and neck polls this could really go either way.

 

If you held a gun to my head and asked for a prediction I'd have to say Remain will edge it but any rally will be short lived.  This is actually a better result for me as it gives a decent change to get in of post euphoria reversals.  A Leave is a catalyst for a big and quick drop that will be hard to take advantage of.  Would have to wait for a retrace.

 

As such I am out of the market until the result and the subsequent overreaction and then I will reassess my long term projections as back to business as usual.  Well central bank manipulations as usual...

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Yes, this has become less like trading setups and more like gambling on a daily news event 50/50 coin toss.

Pricing in by big funds is not a all or nothing proposition but a sliding scale of percentage verses probability and the to and frowing of recent weeks shows shifting probability and so a change of only a percentage of positioning so there must still be plenty of room on the up side on a remain vote, there will be shorts to be dumped creating liquidity for the eager buyers. But as you say, probably more scope on the down side on a leave vote than on the up side on a remain vote.

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Agreed  and it is impossible to gauge what is or is not priced in, hence my default to technicals and sentiment indicators in the big picture.  I can't justify a trade right now but it is important to keep analysing for scenarios so you have a plan once the Brexit thing is settled.  My comments regarding upside vs downside were more to do with GBP rather than FTSE100 in the context of Brexit.  I see upside on stock indices still but not that much and once this current rally tops out (possible fresh all time highs for the US large caps but falling short of that for other markets) then the big drop must surely be on.  This is all Brexit aside.

 

My guess is for a Remain vote but narrowly not the 70/30 of the bookies and IG binaries.  A close vote means the issues is not dead, just like the Scottish independence vote (BTW, does anyone else think the SNP remain position is hypocritical and self serving?).  It also puts the wind up the establishment almost as much as a Leave vote and we have already heard senior politicos in Europe saying that regardless of a remain vote things will have to be looked at to address the Leave side issues.  It retains uncertainty over the future of the EU because, just as in Scotland, Leave will not pack it in after a close vote and other countries might be encouraged to ask for their own referendum.

 

Therefore any Remain rally dividend will be short lived in my view and the economic picture has not changed, nor has the fact that all assets everywhere are in a massive bubble.  Only a massive Remain win can negate this, can anyone see that happening?

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Brexit or not the FTSE 100 looks set for a retrace down at or near 6,300, which  called a little while back.  For me the EW count looks right, could be a small further leg up yet but we are in the resistance zone about the 6,300 mark and bigger picture this fits will a wave 1 up turning point so a wave 2 retrace before a strong rally in wave 3 - Brexit Remain vote as a catalyst?  Could bee worth a Short but only if you get out before the vote results.

 



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No sign of that poll yet. May well see price hover about here after the close but real possibility of large players positioning themselves on tomorrows open causing some big moves in the morning then settling down for an afternoon of waiting. 

 



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Likely some risk off consolidation unless there is some dramatic poll suggesting a big swing to Remain.  At neck and neck anyone betting on Remain has to be sweating it as a result against them will be much more dramatic that a result against anyone with a Leave position.

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FTSE continues it's upward momentum, now well within levels of pre-Brexit days and strong opening drive this morning, banks (main losers on the vote) and mining are the main drivers.

Note the pre-vote spike to 6450 was the high of the year.

Calendar thin today.

 

 

 

 

 

 

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Yes, panic over?  Well maybe for the moment, on Brexit at least.  Slightly different story on FX, although we are getting a retrace just now.  I am waiting for a retrace on stocks before seeking a Long position.  I prefer to trade the US large Caps if going Long, European markets are weaker and subject to volatility until the end game shows the Bear is fully under way.

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What is BOE Mark Carney going to say, speech 4:00 pm today? For a change there is very little speculation in the press (WSJ, Reuters) or on twitter. Is he really going to hint at an interest rate cut as FTSE nears year high. Carney called a meeting with big UK bank heads yesterday, now a hastily called speech today. Whatever is said, likely to have some impact on GBP and FTSE. The 8am candle might give a clue.

 



 

 

 

 

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Will be interesting to see whether the Carney/Osborne planned response to Brexit was all bluster or will be backed up by real substance.  For my money they have to do something, even if it is just symbolic, or they will look like they have no plan at all.  Injections of capital into the banking system and lower rates are likely but how far will they actually go?  Surely lower rates hurts GBP in theory, do they want a lower pound or do they not, this is unclear to me.  Can't see anything they do quelling the uncertainty, only time and a trade deal with the EU and other major countries (especially on services) will do the trick and that will take years.

 

Interestingly GBP seems to have started off the day a bit stronger after a small retrace late last night and over night but stock indices are retracing down, before the next next up in my view.

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Is a FTSE 100 retrace back down about to start?  If we are to see new all time highs on US large Caps and an associate bounce to a big picture Wave 2 (purple on charts below) turning point then the FTSE100 should be in a Wave C up.  A likely place for a retrace would be in the area of the Wave A (pre Brexit vote high).  My current EW count suggests that this is not Wave 3 of Wave C yet but a smaller internal count, although clearly it could be the bigger wave 3.  A strong retrace down would suggest the latter, which would then be followed by a final wave 5 to the top of the rally (possible top of the US market).

 

You can see the congestion zones on the 4 hourly and a zoom in on the hourly chart shows Neg Mom Div on the likely turning point.

 

Anyone got a view on the short term and bigger picture on the FTSE at all?

 

 

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Sod law  but the reason is the Carney speech at the BoE.  He didn't say much apart from the usual "we will do what it takes" stuff but that seems to be all it takes these days for the bulls to take another huge swig of coolade.  Coming out of thee speech is a MSM assumption of more QE and a reduction in interest rates however I heard him give a nod to the detrimental affect of zero rates on bank profitability and stability, I wonder...

 

In any case GBP dropped and regardless of what he does this is the prevailing trend, at least until we get to USD parity.  As for the stock market, I still see a short term dip, US led followed by another charge up. 

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Start of the holiday season, US unofficial half day and 4th July bank hol Monday means slowdown.

GB (09:30)  and US (15:00) manufacturing PMIs today.

FTSE likely to settle into it's new zone. 8am hour bar sets out the range, may seek to retest 6450 but probably can't be bothered.

 



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Well spotted   the 10 minute chart is very interesting, you have a nice Judas swing up off the 8am open taking out the stops above 6570 then a strong push down to 6500 and the 30 RSI, then a pullback back up to the 50 RSI then trend continuation off a pin bar followed by a very strong bear bar to crash through support at 6480. Someone is showing determination.

 



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I think its better to stay away from FTSE100 until brexit settles down, because it moving up and down without any pattern or logic...

I will personally try to focus on GBP/USD and try to catch the last ride all the way 1.25 and then 1.20 hopefully.

Also, I am following Long Gold and Short Crude opportunities...

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Interesting  you positions seem to suggest that you seek to find a trend and follow it?  This is a great strategy as it has often been said that "the trend is your friend".

 

However there is an addendum to that saying and it goes like this, "until the bend in the end..."

 

We have discussed Oil elsewhere, and actually you are looking for the turn there but check out my Gold post and take care on that one in the short to medium term, it could be in for a strong retrace.

 

Regards the FTSE, I am inclined to agree it is hard to trade it but no more so than any other stock index just now.  I don no think Brexit is a big deal for anything except GBP (and probably FTSE250) and that was happening anyway owing to fundamentals (see Brexit thread for a lot more thoughts from people on that topic).  I expect the current retrace that we are in to continue to a short while and then the next leg of the rally to take hold.  FOMC minutes released yesterday basically said USD rate rise on hold until they see whether or not last months disappointing NFP data was a one off or something else.  If we get another poor NFP on Friday then all take of a rate rise is off the table andin fact talk of further stimulus will then come back on the table.  This would have two impacts in my view:

  1. Rally in FX crosses against the USD (probably relatively brief and then other factors will take over again)
  2. Rally in stock indices as fears of rate rise dissipate and hopes for more Fed and BoE stimulus are rekindled 

Personally I prefer to trade US large caps under this scenario as there are drag factors on European stocks connected with the political uncertainty and, in the case of the FTSE, mining, property and banking stock.

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