19th February 2019
Global stocks have rallied to a three-month high as hopes of a breakthrough in US-China trade talks helped extend the rally on markets. Shanghai’s blue-chip stocks surged 3.2pc to hit a six-month high as investors await the outcome of this week’s fresh talks in Washington. Beijing revealed on Friday that negotiators had reached a “consensus in principle on major issues” and had discussed drawing up a memorandum of understanding.
The rivaling superpowers are rushing to beat a tariffs deadline in early March when import taxes on $200bn of Chinese goods heading into the US will be lifted. Trade talks buzz has given the recovery in global stocks a shot in the arm in recent days with the MSCI World index rallying 10pc in 2019.
Although stocks in Europe nudged up, the FTSE 100 snapped its five-day winning streak, put under pressure by the pound bouncing back from three weeks of losses. The index lagged its rivals on the Continent, inching down 0.2pc.
Sterling is bouncing back from three straight weeks of losses to put pressure on the FTSE 100’s overseas earners. The pound has staged a recovery as investors digest the split in the Labour party and await fresh Brexit talks between the Government and the EU.
Brexit Text
U.K. and European officials are working on a new legal text for the most contentious part of the Brexit deal, but time is running out for Prime Minister Theresa May to persuade a fracturing Parliament to unite behind her plan. In Brussels on Monday, May’s Brexit Secretary Stephen Barclay and Attorney General Geoffrey Cox met EU officials in an effort to reach a compromise. May’s aides believe she has until Feb. 27 to get a better deal before Parliament runs out of patience and votes to take control of the process. Barclay and Cox will return to Brussels on Wednesday, according to people familiar with the matter. They will discuss the precise legal wording and form of a new assurance on the most difficult part of the deal: the so-called backstop plan for avoiding a hard border between the U.K. and Ireland.
FTSE 100 Trading Signals, Forecast and Prediction
For today the initial range is looking to be between 7203 and 7250, and after the lacklustre day yesterday with the US closed for Presidents Day, we may well see a bit more movement today. That said, the Asian markets were fairly subdued Tuesday too. We have had a bit of political upheaval yesterday with 7 Labour MP’s jumping ship and going to stand as independents.
If the bulls are able to push above the 7250 level then we should see a rise towards the 7303 level and a short here looks worthwhile if it’s reached, as we may well see a stutter here. The 7250 resistance level is now the 2 hour resistance after yesterdays fairly flat day, and I am thinking that should we see an early rise to this level then a short here is worth taking. If the bulls are to break above the 7303 level then the top of the 10 day Raff channel (still steadily rising) is at 7320, and then the 20 day above that at 7470!
For the bears, we have decent looking support to start with at 7203. A break below this keeps that 7176 support level from yesterday in play as well, with the 7130 level still showing as support lower down. With S1 and the 200ema on the 30min chart at this 7200 area we may well see a hold of this area, though a pop below to 7176 then a retrace wouldn’t be totally surprising to target some stops on recently loaded longs.
Interesting situation really – there is a case for the market to really start stuttering at this 7200 to 7300 area, however the bears haven’t really done anything as yet and as such a push towards the 7304 area is distinctly possible, but a break of 7176 is going to get the bears back into the game. The daily chart still looks bullish and the 25ema has risen further to 7057 for today, and I am still expecting a dip down to test this line and then further upside. The shorter time frames – 2 hour, 30min etc – are more bearish for the moment. That suggests a short term pullback then further upside, but the bears have been hesitant to short it just yet – probably as it could easily spike higher on trade talk or Brexit news. Therefore, caution required still, and watching that 7200 to 7250 range for this morning to start with, with 7304 resistance higher up as decent swing short territory for a run to 7070ish.
Broker
IC Markets – offers market leading pricing and trading conditions by providing clients with True ECN Connectivity; this allows you to trade on institutional grade liquidity from the world’s leading investment banks, hedge funds and dark pool liquidity execution venues. Highly recommended!
Membership
If you would like more detailed analysis for FTSE 100, DAX, Gold and S&P, including the trades that I am looking to take myself, then please join my active members community.
What you get
- Daily Analysis pre market open (sent around 7am each day) for FTSE, DAX, Gold and S&P.
- Daily email pre market includes my trading plan for the day including ORDER levels, with stops and targets/limits
- Telegram live trading room and webinar group membership for discussion and realtime trade updates