FTSE 100

[Mercury]

FTSE100 may be about to break through overhead resistance.  If this happens it would be after a 1-5 wave up A-B-C down series, which normally sets up a much longer move in the direction of the 1-5 (in this case a rally).  Next material resistance zone would be the 7200-7250 zone.

[phillo]

[phillo]

oh, close

[Mercury]

The FTSE100 remains in a very long term (Monthly chart) bull market channel but has not been hitting the top line of that channel for a long time, well it is also a very wide channel, unlike on the US markets which have been much more bullish.  Recent drops have hit important support zones, like most stock indices, and are currently holding in what looks like a market turn back into Bullishness (note, unlike US indices this is not at the bottom of the channel yet but is as the very significant 6,800 area).  This brings up 2 rally scenarios:

1. We saw the market top on 21 May and this will be a relief/retrace rally, maybe to the Fib 62% level before the big one gets going
2. We have not yet seen market tops  and will not get a very strong final push that will suck in all the remaining investors who have been resisting the Bull into a final frenzy that will blow up the bull

I favour #2 because I have not seen NMD on the Weekly or Daily charts at 21 May tops, which is a key indicator for me.  EW labeling supports both scenarios but I might have expected the first wave 1 down of a major bear crash, which is what I am expecting, to run much longer and harder and at least hit the long term trend line, if not actually break it.  On the Daily chart I see that the move down since 21 May does seem to fit and A-B-C retrace move better than a 1-5 motive way, which indicates the prevailing direction is still up.  I have PMD on the Daily and oscillators are pushing out of oversold and of course a strong pin bar price action yesterday.

On the 4 hourly I also have PMD and an ending diagonal channel (parallel lines rather than Triangle in this case).  However I do not see the classic 5 wave internal (doesn't always happen) so I can't rule out another trip down to the lower channel line.  On the 1 hour there is also a possible Triangle breakout and retest, aligned to US markets and a retest across the board (see also my Nasdaq post) is on the cards.

Trading strategy:

• I will need to see alignment across the markets to go long at the right turning points as this is risk given the multiple scenarios and I remain wary of US opening drops.  Still an early bird turn allowing stop protection against the above could be worth it but only at strong turning points will near stop possibilities.
• The safer bet is to wait for a breakout of upper resistance levels, especially after another e.g. down test if support
• Even then we cannot know which macro scenario is in play.  FTSE offers circa 1000 points (more maybe on other indices) but FX offers the same 1000 points at lower risk and greater probability that the full 1000 will materialise...  I think I'll focus on FX for a while and wait in the tall grass for the big short!

Thoughts anyone? @PandaFace @TrendFollower @Caseynotes @elle anyone else?

[Caseynotes]

I think you'll definitely want this chart blue-tacked to the side of the screen ?

 

[Mercury]

Naa, unless you are short term trading I guess.  The bigger picture larger moves will come from global events not local ones and the FTSE100 is filled with multinationals.  The fact that the UK is leaving the EU is a done deal and known thing.  The belief that leaving without a deal, any deal, is bad for the economy is bogus.  No deal is better than a bad deal, free market here we come...  Of course the market is going to fall and we are going to have the mother of all recessions and people will blame Brexit and the deal making of the government and so on and so on but this will be a global crash and recession so how can it bust be Brexit?  Can't be.  As I have said before, history will most likely show we were lucky yo get out before the EU and Euro implodes, now at least the UK can plough its own furrow, which frankly suits the British mentality better...

[Caseynotes]

An 8% drop in the ftse on the brexit vote, not sure which bigger picture or larger moves you might be thinking of. Clearly the fundamentals here have the potential to steamroller over any technical analysis.

[Mercury]

Et tu @Caseynotes!  Brexit vote day was volatile, no question (so was "The Donald" day).  In both cases there was a sharp sell off and then a rapid rally away that, so far, has never looked back (see charts below).  The US election was even more dramatic.  In both cases, perhaps especially in the Brexit case, there were plenty of doom mongers (mostly engorged on sour grapes) pointing to the stock exchanges the morning after and scolding the people who voted in opposition to them, that they would be responsible for ruining the countries prosperity (like that wasn't already ruined...).  None of them appeared a week later to offer a mea culpa so the mass media promoted zeitgeist remains, Brexit bad.  The charts below underline my essential point, you may get short term volatility from Brexit shenanigans but the long term trend will be determined by global factors not local one, not even US presidential elections...  And those factors are too complex to assess real time (economists write their books after the fact!).  Just look at the Credit Crunch (so-called Big Short).  Only a handful of people predicted it and acted on it, everyone else had their noses firmly in the trough...  It is the same now, only the market has so much further to fall this time and the Central Banks are out of ammo! 

And before anyone mentions GBP, that was going down anyway, I think I posted on that elsewhere, and needs to go down to address poor trade balance issues (i.e. lower GBP = better exporting, something the Greeks, Portuguese, Irish, Spanish and Italians can't do - at least not yet...)

[trade247]

I think I'm with @Mercury on this one. Whilst I do believe it's worth looking at the short term movement of the brexit talks, at the end of the day I think if anything negatives in this space will look to devalue the GBP and thus prop up the FTSE outside of the week after a negative news article hits the wires.

In my mind it looks like this 7000 level is a pretty strong physiological level. Support and resistance going all the way back to 2015, and if you take a 200 point variance outside this you're looking at 2013. I think if you are happy to play this small at the moment and can take a 200 point move against you, you should be opening a long.

I feel like the markets are beginning to accept the recent move down as a completed cycle. down 10% ish on a number of indices and people are looking to get those longs on and play it back up. Too much government intervention, debt printing, freeing up of corporate tax and regs, and manipulation to keep the market on track. it'll end in misery, but for now I think people are gearing to play the next leg up.

Only on the move up will I have an opinion on a possible top  

[Caseynotes]

I remember those events well (Brexit and Trump election), we were both watching and commenting on the forum together. I remember most the pained cries of "where was my margin call" and "why was my position liquidated just before the rebound".  Real blood in the water.  

[Mercury]

The "buy the dips" boys must have been chomping at the bit this past month but as you say @cryptotrader it looks like they may be using this long term support as the air-cover they need with their bosses and investors to dive back in Long.  Money managers have to be in the market, we don't.  This is one one advantage over the pros.  Analysts that work for the big financial institutions are predisposed to take the view their company wants them to (or risk getting fired).  That is why you often hear them say things like, "there is a bit more to come in this market yet", or words to that effect.  They never say why, how long, where will it end and they never call the tops.  To do so would drive their clients to withdraw funds.  Turkeys don't vote for Christmas.

This is how we can make our advantage work for us.  Stay out when uncertain, wait for the moves our road maps and assessments are tell us should happen then jump in as a fast follower.  I do try to work out road maps in advance as a guide (including tops, which often don't work, but one day, hopefully soon, it will).

Regarding @Caseynotes view, it isn't wrong if you are a short term/day trader.  Is is if you are a long term swing trader so actually I guess we can both be right here as it all depends on how you are using the information.

 

[Mercury]

Too right @Caseynotes those were long nights but strangely entertaining, mostly for the politics and reactions than the trading (way to volatile and uncertain for me).  Alas nothing similar to come, unless there is a shake up in Germany or some other Black Swan event.  Personally I thing the market tops will come when all is quiet and will go barely commented on until much later, such is the way with mass media and the Financial professional analysts.

[trade247]

36 minutes ago, Caseynotes said:

I remember those events well (Brexit and Trump election), we were both watching and commenting on the forum together. I remember most the pained cries of "where was my margin call" and "why was my position liquidated just before the rebound".  Real blood in the water.  

oh for sure. I tell you also what I find interesting, and that the fact people forget things so quickly. Only 10 years on from '08 and how many people remember the issues which come with a global correction? few and far between....

people literally thought it would be the end of capitalism.

[trade247]

For me the real question is "what is going to happen with GBP". I think I read  stat that only 16% of revenue for companies within the FTSE 100 actually comes from the UK - so if we look at a depreciation in our currency we can be looking for a rally in FTSE. Is the GBP likely to sell off in the coming months? Possible ...

not parity in my eyes against the euro, but we could certainly look to take back those lows seen in the near aftermath of the brexit vote.

[Caseynotes]

14 minutes ago, cryptotrader said:

not parity in my eyes against the euro, but we could certainly look to take back those lows seen in the near aftermath of the brexit vote.

Very possible @cryptotrader, I have written before that those lows in the immediate Brexit vote aftermath were based on the expectation that Brexit meant a no-deal Brexit. The GBP gained as deals were put forward that watered down what Brexit was actually going to mean, especially on news of deals that looked suspiciously like no Brexit at all. 

[Guest PandaFace]

@Mercury to go back at those points you originally tagged me in. Yeh I agree with point one for sure - FTSE is broad and we need to wait until wider market is on the move before committing. 

THAT SAID - i would be keen to open a tracker ETF non leveraged if we get down to 6500 in the near term. I think there’s more upside and would be happy to take the low cost optionyo not miss the move. Again, after the break to ath I’d be closing. 

[Mercury]

Understand the logic of that @PandaFace but it would depend on the price action for me.  If the market does follow one of  my road maps with a rally phase and then drops back to 6400 I would be on a shorting strategy.  If it carries on down now as part of this Bearish move then we could expect to see a relief rally, maybe off long term support trend lines around the 6400 zone, however I would also need to see similar set ups on other indices, especially the US.  As for me I remain firmly in cash on the investment front until the "Even Bigger Short" is done...

 

[Mercury]

FTSE100 breaks back strongly after retest of breakout zone.  Significant rally phase look on from here.

Thoughts? @Caseynotes, @PandaFace, @TrendFollower, @elle, anyone else?

[Mercury]

I should point out that a 1 hour chart Flag breakout and retest in EW1-2 retrace is eminently possible before the rally really gets going, especially as US markets haven't really retested yet...  Could be a choppy few days ahead of US NFP.

 

[Caseynotes]

For Ftse a lot will depend on Dax today which finally pushed through 11500 this morning pulling Ftse up with it to yesterday's highs, but Dax currently rechecking the 11500 obliging Ftse to follow.

  

[Mercury]

Not sure I like my 1 hour Flag set up as solid.  Perhaps prefer to see a retrace on the Daily EW1-2 to prime the pump on this one and perhaps tomorrows NFP worries will drag stocks back down in retrace before a strong wave 3 rally?  With NFP so near I'm am too cautions to go Long here.  Even a small higher high on US stocks could fall back for a retrace to NFP point so I'm awaiting events and sticking with FX for now, although I still think we will get a rally in due course.  Timing is everything in trading...

Re FTSE250 @TrendFollower I agree in terms of actual stocks but the FTSE is the more liquid market and I prefer to only trade the bigger markets for that reason.  Less spiky, less prone to odd moves, conforms better to my analytical techniques and easier to get out of if it reverses.

[Mercury]

Like the Nasdaq the FTSE did indeed come back in retrace to retest the breakout of the 4 hourly chart channel line & Fib 62% off the 29 Oct low.  It was a good place to go Long, which I did on this one, now let's see if it rallies away...  Gold/Silver already look to be making another run down to trading range support and GBP is still making up its mind what to do but if it moved down then FTSE Long has some positive correlations going on.

[Nelsy-Boy]

If the FTSE hits midnight roughly where it is now then I think the price could touch 6980 again but beyond that I'm not sure. I'm still only looking at daily candles though.

[Mercury]

Could do @Nelsy-Boyalthough still has to get through support level around 7,025.  I can see another leg down to test this, especially of US large caps drop off towards the end of day.

 

[Mercury]

FTSE looks to be breaking away from the retrace turn zone on opening.  As previously mentioned @TrendFollower I am long on the Fib rejection with a stop just below the next Fib level.  I was guarding against another possible small leg down but looks like that danger has passed, for now...  Next stop is resistance at the previous turn down zone and with US large caps already broken through there respective zones the stage is set well for a FTSE rally.  Not also that the past retraces are setting up a long wave C phase under EWT so this could be the beginning of a decent MT (a month or so) trend at least until we come up to the next US NFP I am thinking at present.  There should be a consolidation Flag zone at some point, which will help decide the end of the rally for me but if the market is to top out this side of Christmas then this one will be fast.  And so far (looking at the US large caps) it has already been a fast and strong one, with shallow retraces.  This is very bullish.