Technical analysis for FTSE 100 for 24th April 2024
London's FTSE100 hit a record high on Tuesday, raising hopes that Britain's stock market might finally be shaking off years of underperformance as investors look for bargains and UK growth picks up.
Months after rival indexes across the world started chalking up records, Britain's benchmark stock index touched a new peak of 8,076.52, surpassing its previous high from February 2023.
The new peak brings this year's gains for the FTSE 100 to 4% - still behind the 6% rise in the pan-European STOXX 600, as well as France's CAC 40 and Germany's DAX, which are up 7.5% and 7.8% respectively.
The FTSE100 has long underperformed - whether because of the uncertainty surrounding Britain's economy since its 2016 vote to leave the European Union or because of its perceived shortcomings compared with rival indexes.
Heavily weighted towards basic resources stocks, the FTSE100 has not benefited from the AI-mania that has lifted U.S. markets, nor from the surge in luxury stocks.
But some of these drivers for foreign markets have started to wane, just as rising commodity prices, a weaker pound, a pick-up in UK growth - and lowly valuations - are tempting some investors back to London-listed equities.
The London market has a price/earnings ratio of less than 11, compared with 13 for the STOXX 600 and 20 for the S&P 500, trading near its largest discount on record, based on LSEG Datastream data.
The view of the UK stock market as undervalued has contributed to a dip in new listings in London, and spurred a political push to boost the market, including talk of getting pension schemes to up their exposure to UK stocks and plans for a new "UK ISA" tax-free savings product for retail investors.
The pound is down around 2.2% against the dollar this year, boosting some of the profits FTSE-100 companies make abroad.
Barclays estimates that about 75% of the revenues of FTSE-100 companies are generated overseas.
Higher energy prices are adding to the positive mood for the resources-heavy FTSE-100, with oil prices up 13% this year.
Meanwhile, traders are betting the Bank of England will cut interest rates slightly more aggressively than the U.S. Federal Reserve in 2024, with around 50 basis points of UK cuts priced in for this year as of Tuesday, versus 40 in the U.S.
Interest Rates
Interest rate cuts are still “some way off”, the Bank of England’s chief economist has warned, as hopes for rapidly falling borrowing costs around the world fade.
Huw Pill said that while the Bank was “somewhat closer” to being able to cut rates, an “absence of news” meant he still believed more evidence was needed before borrowing costs could come down. Speaking at the London campus of the University of Chicago Booth School of Business, Mr Pill said: “We still have a reasonable way to go before I am convinced that the persistent momentum in underlying inflation has stabilised at rates consistent with achievement of the 2pc inflation target on a sustainable basis.”
Asia/US
Asian stocks rose on Wednesday, tracking Wall Street, as an after-hours surge in shares of EV maker Tesla following its promise of new models, and upbeat earnings from some U.S. companies lifted risk sentiment.
The yen was rooted near 34-year lows, keeping traders wary of possible intervention from Tokyo.
MSCI's broadest index of Asia-Pacific shares outside Japan gained 1.55%, having climbed 1% on Tuesday, as stocks rebounded from last week's steep selloff. Japan's Nikkei surged 2%.
China stocks were mixed, with the blue-chip index flat, while Hong Kong's Hang Seng Index added 1.6%.
Tesla kicked off the earnings season for U.S. tech megacaps, announcing the launch of new electric vehicle models that sent its shares up 12% in extended trading.
U.S. stocks closed higher on Tuesday as companies such as automaker General Motors reported strong earnings. E-mini futures for the S&P 500 rose 0.27%.
The earnings-packed week includes results from tech giants Meta Platforms, Alphabet and Microsoft, and will likely set the tone for the near term.
Markets are now pricing in September to be when the Federal Reserve would deliver its first rate cut, with expectations of 43 basis points of cuts this year. At the start of the year, traders had priced in 150 bps of easing for the whole year.
U.S. crude fell 0.1% to $83.28 per barrel and Brent was at $88.31, down 0.12% on the day. Oil prices gained on Tuesday as investor focus shifted away from tensions in the Middle East.
FTSE 100 technical analysis for today, 24th April 2024
The climb from the 8020 level from yesterday is still playing out well and I have just taken some more profit off at 8100. Overnight we have hit the 8120 level and dropped back but once again the bulls will be keen to build on this today. However 8120 is likely to see a drop off if it gets tested again as we have R2 here also, and 8113 is the key fib for today. As such a profit taking point here, with a subsequent drop down to the daily pivot at the 8057 level would make sense.
Above the 8120 level then 8155 is in play as R3 here, and also ties in with the top of the 20d Raff channel. As such, we may see this cap proceedings for today and a decent 400 point bounce from the war worry driven low at 7750....
Should the bulls break that though then 8200 is next up being the round number, and then 8204 for the top of the 10d Raff. That may well be a bit of a big ask for today though, but as we are in earnings season it can get more volatile. At 13:30 today we have the US Durable Goods Orders news, with a forecasted rise to 2.5%. That may well help the bulls this afternoon as well if it comes in as forecasted.
Support wise then I am looking at the daily pivot to be the key one to start with, at 8057. This also ties in with a test of the Hull MA on the 2h chart, for the first touch of this moving average since it's gone bullish. As such it's pretty strong support and I would like to see another bounce here if seen.
Continue to trail the stop on the long though while its around this 8100 level.
The Raff channels are now both heading up again as the FTSE100 starts to find some love having been left behind while other markets have climbed. That bodes well for a test of the 8300 level soon that has been on our radar for a while now.
The S&P500 is nearly testing its daily resistance level at 5108 so this is the level that the bulls will need to break above for further upside. We have the 20d Raff channel top here, and also the 25ema so will likely be a profit point/bear attack level.
The Dax40 is also looking more positive with the daily EMAs crossing over to bullish today, and the 18000 level locking in as support. 18100 is the daily pivot and support above that. We are just on key fib resistance at 18237 to start with so may well see a dip and rise play out on that today.
Good luck today.
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