FTSE 100 Scrooges eye 5000 though Santa in view

There was a fair chance FTSE’s remarkable ‘Santa sell-off’ could run a bit further on Friday, but signs of an upswing were also emerging.

 

 

A Zuma and a slowdown

The FTSE 100 was the highest-profile global market impacted by a sudden upsurge in South African political volatility combined with the latest threat to commodities prices.

The index dived to a 10-week low.

Already punch-drunk stocks like Anglo American, BHP Billiton and Rio Tinto led the market back towards the year’s worst levels after China’s currency broke through its summer-devaluation lows to its weakest in 4½-years.

In turn, the FTSE 100 closed within spitting distance of its 2015 floor, so far, at 5768/5898.

 

 

 

FTSE 100 DAILY CHART

Please click image to enlarge

 

 

 

It had fallen as much as 7.7% in seven straight losing sessions.

With due caution on technical analysis of the gauge, as it isn’t directly traded, the steepness of the channel that formed around the index was remarkable.

A sizeable upsurge in implied volatility over the last few days was also in the picture.

That was most clearly reflected by Chicago Board Options Exchange’s VIX index leaping 26% on Friday, among its biggest one-day jumps since spiking 90% in one August session.

 

 

 

’5000′ maniacs

Additionally, there was intense positioning in FTSE options trading.

Puts with strikes on 6000 expiring 18th December broke into the money on Friday.

The trade has shown strong demand of late, looking at Intercontinental Exchange open interest of 26,058.

However, the biggest demand on ICE FTSE options with nearby expiry was for out-of-the-money 18 Dec 5000 puts.

Open interest approaching 35,000 suggested many were tempted by the lure of a cheap, risky punt.

ICE’s main FTSE future contract—the main asset from which the index options are derived—traded almost 16% away from the 5000 strike at online time.

Holders of the option had a week to make up the distance.

 

 

 

Santa Stats

ICE FTSE Future has clattered down the walls of similarly steep channel as its cash counterpart, busting its previous 2015 low in the process.

A visit to 5000 by next Friday still looked unlikely though, especially with an important 161.8% extension at 5886.6 apparent on a four-hourly view, and the year’s intraday low at 5761.

Additionally, momentum (Stochastic sub-chart) in the same interval remained above a falling trend from earlier in the month.

Convergence with an overhead momentum trend is projected a day before the 5000 put’s expiry.

The falling wedge pattern forming had a bullish potential.

All this was happening against the backdrop of expectation that a near-traditional—and statistically prevalent—global equity market rally would appear in the closing weeks of the year.

 

 

 

ICE FTSE FUTURE FOUR-HOURLY CHART

 

Please click image to enlarge

 

 

 

DJIA travels without Transports

On the negative side of the ledger were similarly dented markets in Europe and The States.

S&P 500 was 2% in the red for the year after falling 3% so far in December.

Germany’s DAX was 9% lower month-to-date.

Meanwhile, the Dow Jones Industrial Average continued an increasingly concerning divergence with its Dow Transports counterpart.

The closely watched spread marked fresh ‘wides’ for the year above 9900 in recent days.

Finally whilst FTSE assets were deeply oversold in their shorter term intervals, weekly charts had further to go on the downside to reach that state.

 

 

 

UK100 traders eye 5950

Dealing in City Index’s UK100 Daily Funded Trade had a similar character in a short-term view.

Drawing Fibonacci intervals over the move with the most intense psychological charge so far this month—6443s to 6212s on 3rd December—revealed UK100 was battling a potentially significant 150% mark (5945) at online time.

 

 

 

UK100 HALF-HOURLY CHART

Please click image to enlarge

 

 

 

An even likelier pivot was the 161.8% notch at 5916, suggesting support.

The main goal for bulls would be to get back above a falling line commencing from the end of November.

The nearest entrance would probably be 5950s cohering with short-term support-turned-resistance around the same levels.

Failure beneath current lows did not seem favoured in the medium term due to overstretched momentum (Slow Stochastic).

However the FTSE 100 has certainly had many negative surprises so far this month and another ‘scrooge’-like spike lower could not be ruled out.