Dingdongler

Stupid question but what time (GMT) does the Dow open?

Dingdongler

Thanks mate. Are you also expecting a correction in the Dow today?

alloy

2.30pm

alloy

Dow has been a stronger trend then the FTSE, Friday it closed on highs not seen since June 2008. I think the middle east gives investors a reason to book profits, but don't forget the market prices in these uncertainties in advance so its not a new revelation that will cause unrivaled selling. 12,000 is psychological more than technical, but the 6month uptrend line is just beneath it so should offer a good level to find an equilibrium, circa 3% off Fridays closing highs.

TelBoy

Libya, and the risk of contagion to China. Flight to quality, i.e. not equity.

Dingdongler

Thanks mate. Can you help me with something please? I've been trying to find an ETF that reflects the DJ and keep failing. I have a list of iShares ones here and even though my trading account is with Barclays when I put the ticker code into their quote box nothing is found

http://www.etftopics.com/barclays-ishares/

alloy

On Bloomberg it's DIA US EQUITY, it's the SPDR DJIAverage ETF Trust

Trout

iTrader: (1)

Already down to 5,932.

alloy

And....?

alloy

Here's your FTSE pic on the daily chart, horizontal yellow lines are the levels of support i mention, dashed red and green channel is the uptrend and there is a fib retracement grid which shows the 5785 and 5600 levels....not advice or info for you to trade from but to be something for you to perhaps discuss or at least think about

Trout

iTrader: (1)

A mid-size correction on the Dow today as predicted by some.

alloy

No doubt that the market was going to be under pressure y'day, with the accumulation of sell orders over the American long weekend and escalating issues in the middle east, I think the outcome was pretty much a given. What is interesting though is the intraday price action, the initial move down followed by a 68% retracement and then sellers ticking it down gently and consistently throughout the session. There was no real panic about the move, which again highlights the conviction behind the trend. Also y'day the volume was over the average but still shy of Friday's vol where we saw the market close on new 30month highs, this says to me the bulls are still very much in control, be interesting to see today if the Dow can hold its 21EMA which has offered trend support throughout the latest move, circa 12,140.

Trade smart people!

Dingdongler

Alloy, what do you see as driving this market?

QE?

Low returns on cash?

alloy

I think in lieu of the past 2 years companys have scaled back and become leaner and meaner, paying attractive dividends and this restructuring has made them more resliant against the perills of the future and at the same time giving them a stronger base to grow as the economic recovery continues. I think to the investor these qualities are very desireable. Bonds are less attractive, staying in cash is decontstructive with inflation, QE is giving this market bouyancy.....as far as i am concerned and IMHO the only asset class to be in is equities. Irrespective of the rally off the lows there still remain an abundance of high value plays for the future. Having said that nothing goes up in a straight line and caution should be the theme in anyones strategy. I know bears who have been selling this market all the way up, being a contrarian can be profitable but i prefer to go back to basics and trade with the trend, trying not to get caught up in calling tops and bottoms as this is an easy exercise in how to drain your account. As far as corrections taking place if in doubt, hedge, wait for the confirmation give another punter the first 10-20 ticks on the move then look to reposition when momentum is established. Selling things that go up doesn't make sense in my mind, it's going up for a reason!

Dingdongler

Thanks Alloy. May I summarise things (which I understand is always fraught with problems) for sonebody like me who lacks your expert knowledge.

On the whole you are bullish on the mid term up trend in US equities?

Do you have similar feelings on other equities ie India, Russia or UK?

Thanks again.

alloy

On the whole i'm bullish on US and European equities, China showing a bit of weakness and is in a consolidation phase, Brazil as i suspected was a gamble on emerging markets bouncing back stronger than more established markets now there seems to be a move out of here seemingly into more robust US equities similar story with India. Japan still looks healthy, Russia looks comfortable for now....these are of course generalisations anything specific give me a shout mate

Dingdongler

Thanks mate, yes I understand it's a huge generalisation and specific to right here right now.

Simon K

Am I the only one, or did the rest of you not understand a single word of that ^^^^^^^^ :-)

Whilst working in the investment banking world, supporting the unix systems, perhaps I should of learnt more about the stock market / trades. :-(

Never mind.

SBK

alloy

India getting smoked today, FTSE and US markets really need to see the bulls take control from these levels. FTSE on good support has potential to rally from here but with yesterdays follow through and the implications of oil surging it is important to see some positive price action so as not to concede the uptrend.

Dingdongler

Oh yes. Nifty and Sensex both down about 3%!

Alloy, is this due to foreign investors taking cash out because they now see green pastures in the established markets or is it due to the rampant inflation that India is having difficulty controlling?

Thanks

alloy

in my eyes, both are strong factors driving the change

alloy

Again not advice or recommendation to trade, but for topical discussion here is the DOW daily picture. Note the 50 EMA (orange line) pretty much supporting the trendline of the ascending channel, ear marks it as strong support and this is what we look for to be broken. RSI is still making higher lows which gives me comfort on the long side of the market. I think a lot of retail are getting carried away with the bear case, all pro traders know the trend is their friend until it ends, and as such i think there will be some appetite to buy into this move down, a rally will then take out all the retail short stops and further fuel an uptick....

Also picture here of the FTSE Futures this time a 60min chart, again we see ascending channel and within that a short term channel taking us to the support of the 3month trend, what we have also seen this downtrend broken with a move through this pm to 5920, follow through price action is imperative!

Dingdongler

Alloy, I followed you on the Dow chart but got a bit confused on the ftse. Are you saying the charts indicate potential downward pressure for the ftse?

alloy

The FTSE, we can see the medium trend which is the ascending channel denoted by the green lines and within that as a result of this week we see a short term down trend denoted by the blue lines. This down trend has carried us back to the medium term trend support which on the balance of probabilities should be an area the bulls have an invested interest in protecting and as such we look to see price action confirm this with a leg forward. The below pic is the image above zoomed in, and as you can see this afternoon price broke out of the downtrend, now we look to see this downtrend line act as price support as we consolidate. We are very much at an inflection point where a breakdown would signal a stonger bear case, but as pro traders know the trend is your friend until it ends so arguably the right trade here, at least in theory, is to be long with an appropriate stop loss....

alloy

Also if you look at a daily FTSE Index chart (cash not futures) we can see we have pulled back and traded in those areas of support i noted at the start of the week. Today's candle is termed a "dragon fly doji", this is a very narrow body which shows indecision with a lower tail showing the bulls stepping upto the plate. This is a key candlestick i trade this candle 9/10 with success. Things of interest here are not only the candles shape but with respect to the low bouncing off the 3 month up trend line and then the close being back up on the 8 month trend line.....this picture tells me to trade with the bulls.....

alloy

Just been looking at a chart comparing FTSE and S&P500 normalised over the past 5 years. The two indicies have performed nigh on the same as of today should you have invested in either 5 years ago on a normailised basis your return would be pretty much equal. In recent times since the lows the FTSE has actually outperformed the S&P since Q3 2008, when we see corrections the FTSE pulls back to track the S&P performance, but recovers to the upside with an outperformance, historically speaking. Obviously there are a number of reasons as to why this has been the case, but it is food for thought when you're looking at where to take risk on....