Indices

[Caseynotes]

As quoted from John Kicklighters blog today,  "Given that US indices – a proxy for risk trends – are still on pace for the best month’s performance in years".

Dow well over 5% gain for this month so far and as John states is heading to be the best performing month literally for years. Certainly not a month to spend attempting shorts.

[Caseynotes]

Just looking at the Dax weekly chart and the bulls must be looking at that wall ahead with a certain amount of trepidation. Probably thinking to themselves they'll be needing some help from Dow if they're to break through that.

FOMC and a trade dispute break through together could do it.

[Caseynotes]

US and China trade officials meeting on Wednesday and Thursday. Steven Mnuchin says that if China presents enough trade concessions to Trump, there is a chance that the administration may seek to lift all tariffs.

US delivered a new set of proposals last month now  Chinese Vice Premier Liu He is in Washington with their response. China is facing added urgency to end the trade spat amid the weakest domestic growth since 2009.

https://www.bloomberg.com/news/articles/2019-01-29/mnuchin-signals-chance-to-end-china-tariff-war-ahead-of-talks?utm_medium=social&cmpid%3D=socialflow-twitter-economics&utm_campaign=socialflow-organic&utm_source=twitter&utm_content=economics

 

 

Edited January 29, 2019 by Caseynotes

[trade247]

in regards to parliamentary amendments later today

"In theory, if any amendments pass other than Brady’s, it’s not good news for May -- though it’s important to note that Tuesday’s votes are not of the binding type May lost earlier this month when her deal was rejected. The Cooper plan to delay Brexit is the one that has the most potential to derail May’s strategy. Meanwhile if the Brady amendment on the backstop secures a majority, May will consider that a mandate to try to negotiate again with the EU."

[Caseynotes]

Dax remains stagnant, Dow drifting in tight range as does Nikkei and Ftse continues to be reactive to Brexit headlines.

Today the FOMC rate decision, statement and presser starting at 7:00 pm, also today possible news on US-China talks and more earnings data releases MS, FB, Tesla, Boeing, etc (see last post in linked thread.

Daily charts; 

 

[Caseynotes]

The Boeing beat lifts Dow to complete the leg up to the top of the recent tight range seen on the daily in this mornings post.

Concerned chatter on twitter on the possibility the FOMC statement this evening won't be as dovish as the market had hoped and has already priced in.

Hourly Dow chart;

 

[Caseynotes]

Another good beat on the ADP  non-farm payrolls today, 213k vs 180k expected. Bodes well again for Friday's NFP which is forecasting 165k.

[Caseynotes]

Interesting increasing disconnect between US indices and Europe, UK and Japan. The FOMC boost yesterday propelled Dow through resistance where the others were halted. Dax still reeling from the German finance minister's down grade of the GDP forecast from 1.8% to just 1% for this year, Ftse with the ongoing Brexit concerns and Nikkei presumably waiting for the US-China trade talks result.

Trump meeting with China’s Vice Premier Liu He today at 20:00 GMT.

Daily charts;

[Caseynotes]

Dax falling through multiple levels after an attempt and miss on the daily chart resistance (11321), now looking at daily chart support around 11000.

5 min chart.

[Caseynotes]

Dow breakout to the upside confirmed yesterday while the other three remain trapped. Dax rechecked the bottom of the range. Ftse falling back into line but refusing at the 7000 fence.

China stocks rise in spite of falling PMI figures.

Daily charts;

[Caseynotes]

Big beat on Friday's NFP but the shine taken off by a decrease in the Average Hourly Earnings figure.

US Manu PMI was also a beat at 56.6 vs  54.1 expected while the report also states that the overall US economy grew for the 117th consecutive month.

https://www.prnewswire.com/news-releases/pmi-at-56-6-january-manufacturing-ism-report-on-business-300787873.html

Weekly charts and Dow now well out of recent consolidation and heading for next resistance at 26069 while the others remain capped with strong resistance immediately overhead.

 

[Caseynotes]

New week new levels.

Dow with overhead resistance at 25189 and support at 24322, looking for a break and upside continuation.

Dax sitting mid range between 11047 and 11321 so looking for a retest of either.

Ftse held at 7032 and looking to break after a strong run up last week.

Nikkei held at 20967 and also looking to break.

Not much in the way of data releases this week, China public holiday all week.

[Caseynotes]

Dow and Ftse sitting on resistance looking to break higher this morning, Dax may follow while Nikkei tried to break earlier but was beaten back.

1 hour charts;

[Caseynotes]

Dax lead the charge out, Dow and Ftse followed. Dow back into clear space but Dax and Ftse closing in on their respective weekly chart resistance levels. If Dow can keep going will be interesting to see if Dax and Ftse can follow.

4 hr charts;

[Caseynotes]

Dow forms another bull flag overnight and Dax and Ftse follow suit while Nikkei still struggling with it's weekly chart resistance level at 20967. 

4 hour chartrs;

[Caseynotes]

Dow spent yesterday defining a new range and very graphically demonstrates what drives price. Price is driven to find buyers if there is a surfit of sellers and visa versa, at the bottom of the range an excess of buyers forced price to find sellers who had congregated at the top of the range, once there, price found an excess of sellers and so needed to find buyers who were congregated at the bottom of the range. You can never be sure 100% where buyers or sellers are waiting but a best guess is at a prior support or resistance level because it's an obvious place to hang out with like minded types, why buy higher up when you can likely get it cheaper, why sell lower when you can likely get a higher price.

Indicators have nothing to do with this reality, the only indicator really worth having is an order book that isn't spoofed or dark pooled. So which way will price move next. Until a break it will continue the orderly retesting of the current high and low. If it breaks lower it will most likely head to the next support level, if it breaks higher it will most likely head to the next resistance level. Gauging direction is that simple, the tricky part is the actual trade execution.

UK bank rate decision today, not much expected but the usual stoking of Project Fear.

[Caseynotes]

EU officials have cut their 2019 growth forecast for the eurozone from 1.9% to 1.3%. By country see pic below.

[Caseynotes]

Following the early morning post Dow and Dax both broke lower while Ftse held. Dow finding support around 25186 and Dax, following the down graded growth forecasts has dropped all the way to the daily chart support level 11098.

[Caseynotes]

Market correction yesterday on the realisation that not only did the recent trade talks produce nothing but that there is little hope of anything before the March 1 ending of the 90 day truce. Bets laid on expecting a better result were taken off the table.

Thought for the day. For a year now the markets have been ruled by the China/US trade dispute's ups and downs but there are those who will tell you otherwise, that it's all down to technical corrections, or that a top or a bottom is in or whatever. Probably the most important attribute a new trader must learn real fast is how to spot BS, this is difficult because the new trader doesn't realise they are completely surrounded by it, this profession above most others attracts the BS'ers. Probably 80% of related content on instagram and twitter is BS. People calling the market, if they are ever right they crow loudly, when they are wrong they go quiet and wait for people to forget before starting it all over again. You need to block it all out and concentrate on reactions rather than predictions and having a plan for whatever the market does.

Back to the charts and several support levels were taken out but Dow looking to find support at the top of the prior bull flag. Dax is more uncertain with the stream of poor economic data releases, fresh data due today so we'll see how that goes. Nikkei still looking for the buyers having not found them at the recent lows around 20401. And Ftse still holding up well and remains in touch with the longer term resistance level at 7146.

 

 

 

[JamesIG]

Hi all - we have a Brexit round table today (Friday 8th Feb) which unfortunately won't be live, but we will be able to publish the video afterwards. This will be with Simon French from Panmure Gordon, and Robert Oulds from Bruges Group. It should be a great discussion, and if you have any questions you wanted to put to the panel please add a comment and make sure to tag me with the @ symbol. 

[Justinian]

"You need to block it all out and concentrate on reactions rather than predictions and having a plan for whatever the market does. "

Great line Caseynotes.

One reason why I think Macro trading is flawed - based on making predictions and when price goes against you, you can remain wedded to your position and load up with even more 'bargains'. God punishes those who pretend to knowledge and think they know the future.

Anyway, what do you think about the changes in IG's funding costs? Will it alter how you trade? I should start a different thread I guess.

 

 

 

[Caseynotes]

That's right @Justinian,  probably number one cause of failure is hanging on to losing trades. It's not even necessarily about the money, it's more to do with not wanting to admit you're wrong. There is a noticeable trend whereby the new trader starts out making predictions on the market then realising they can't do it, next step is to try and find someone who can and that blows even more money. Unless you're getting illegal insider information from an investment bank think to follow the market rather than trying to second guess it all the time.

Major turns happen at major support/resistance levels or on major news, once a new direction is clear look for a place to climb aboard. 

Increased margin means keeping more in the account but not affecting trading otherwise, I never sail right on the edge anyway.

[Justinian]

Hi Casey, I'm not referring to the ESMA-related margin increases. This is actually funding costs I'm talking about.

 

Changes to overnight funding rates

From 4 February, we’re changing the way we calculate overnight funding on shares and indices. Whereas the interest rate used to be based on the currency of the trade, it will now be based on the currency of the underlying instrument.

This could affect you positively or negatively – see below for reference.

Example: Wall Street

If you trade on Wall Street in GBP, you’d previously pay overnight funding based on the GBP interest rate. From 4 February, you’ll pay funding based on the USD rate instead.

So if you bought £2 per point at 24,000, giving you a notional value of £48,000, this is how your funding charges would change:
 

	Interbank rate1	IG rate2	Daily cost
GBP	0.73%	3.23%	£4.31
USD	2.52%	5.02%	£6.69
Difference:			£-2.38

If you sold £2 per point at 24,000, giving you a notional value of £48,000, this is how your funding charges would change:
 

	Interbank rate1	IG rate2	Daily cost
GBP	0.73%	1.77%	£2.36
USD	2.52%	-0.02%	-£0.03
Difference:			£2.39

¹ ‘Rate’ refers to the 1-month interbank funding rate (eg LIBOR for the UK). Rates correct as of 14 January 2019.

² ‘IG rate’ refers our total funding charge, which is 2.5% on top of the interbank rate. We debit your account for a long position, and credit your account for a short position (if the interbank funding rate is greater than 2.5%, or greater than 3% on mini/micro CFD contracts). Find out more here.

[Caseynotes]

right @Justinian, i only rarely hold positions overnight so doesn't really affect me.

[Caseynotes]

4 Hour charts and looking for Dow continuation of the uptrend with a test of the H4 resistance 25156 and then on to the daily chart resistance 25439. Ftse in a similar situation, UK GDP and manu prod data at 9:30.

Dax and Nikkei with similar looking charts, Dax suffering a stream of poor data releases last week while Nikkei pulled into the Asian slump. Japan public holiday today. 

Not much on the Euro calendar this week, if Dow can make progress will be looking for Dax to follow.

[Caseynotes]

Dow stalled yesterday after initially pushing up though 25156 from yesterday's post. Nikkei had a strong push up overnight and Dax has worked it's way into clear space while Ftse has moved up to resistance.

Today will be looking again for Dow to push up through H4 resistance currently at 25244 and for Dax and Ftse to follow.

As ever though, a failure at resistance usually initiates a test of support.

H1 charts;

[Caseynotes]

IG 'Trade of the Week' Dow moves up through the daily chart resistance level  25439 mentioned in Monday's post, may see a retest of that today. The others following on with Ftse back up through the weekly resistance level for a second attempt on 7188. Dax making hard work of it and still has a lot of ground to make up to reach resistance at 11387. Nikkei finally breaks up through 20967.

Daily charts;

[Caseynotes]

Dow after a second retest of support at 25439 now looking for resistance, the most recent level to test is at 25626. The other indices look poised to follow.

H1 charts;

[Caseynotes]

Dax caught out this morning. Slightly better than expected German GDP figures on the Euro open sent Dax racing higher but Dow found sellers at the H4 resistance level and reversed hauling Dax down with it.

H1 charts;

[Caseynotes]

Poor US retail sales and PPI data dragging indices down;