Bull in charge to start 2017 | 7179 7197 resistance | Daily RSI 80

FTSE 100 Support 7145 7131 7126 7122 7107 7096 7007
FTSE 100 Resistance 7158 7162 7170 7197 7237

Good morning. Happy New Year and I hope you had a good break. Wonder how this year will play out but it certainly got off to a strong start with the out of hours trading yesterday leading the FTSE to a rise to the 7155 resistance level that we had from last week. The Dax was on a charge yesterday with a decent PMI data result, adding over 120 to test the gap at 11620. The FTSE 100 had an initial dip from the 7155 level but has risen back to test it overnight. Its almost like they all want to climb as high as they can before all hell breaks loose as the daily RSI is now at 80 (overbought)!

US & Asia Overnight from Bloomberg

• Most markets are trading for the first time in 2017 on Tuesday
• European equities climbed Monday on manufacturing strength

The dollar fell against most of its peers on the first full trading day of the New Year, unwinding some gains that have been spurred by the prospect of higher U.S. interest rates. Shares advanced in much of Asia and crude oil climbed.

Australia’s benchmark index, the first major market to open Tuesday, touched the highest level in 1 1/2 years, while South Korean, Chinese and Hong Kong equities climbed too. The New Zealand and Australian currencies were among the leading gainers versus the greenback. The yen and euro also appreciated. Gold advanced for the fifth time in six sessions. Most markets were shut Monday, though European stocks advanced amid evidence of stronger manufacturing in the euro area.

The dollar closed out 2016 with its strongest quarterly rally since 2008 as 10-year Treasuries offered the highest yields since 1999 relative to Group-of-Seven peers. Reports on Sunday showed China’s official factory gauge stabilized near a post-2012 high while services remained robust, capping a year of steady improvement in both indicators. A private factory gauge released Tuesday also came in better than anticipated. Swaps contracts show expectations that the Federal Reserve will raise interest rates twice this year, after increasing them once in each of the past two years.

“I still think we have a firm dollar-strength trend in place, however I am wary of a New Year rally for riskier assets, especially the Aussie,” said Hugh Killen, Sydney-based head of foreign exchange, fixed income and commodities trading at Westpac Banking Corp., Australia’s second-biggest lender. “The Trump reflation trade has been so powerful, but I think we need to hold off now until the inauguration when we may get a better idea of what his presidency will really look like.”

Stocks

The Shanghai Composite Index advanced 0.7 percent as of 12:29 p.m. in Singapore, while Hong Kong’s Hang Seng Index added 0.5 percent and South Korea’s Kospi jumped 0.7 percent, the most since Dec. 8.
Australia’s S&P/ASX 200 Index rose 1.2, advancing for the third time in four trading days. Australia & New Zealand Banking Corp. gained 1.8 percent after announcing it sold a 20 percent stake in Shanghai Rural Commercial Bank for A$1.84 billion ($1.32 billion).
India’s S&P BSE Sensex fell 0.1 percent in a second day of declines.
Financial markets in Japan were closed for a bank holiday.
The Euro Stoxx 50 index gained 0.6 percent on Monday, with the U.K. and Swiss markets closed for holidays. That kept the benchmark in overbought territory, as measured by the relative-strength index, for a 12th day, matching its longest-such run this century.
Italy’s FTSE MIB leaped 1.7 percent Monday. Data showed the country’s manufacturing PMI rose to 53.2 for December versus 52.2 in November, while economists expected 52.3.
U.S. markets were closed Monday. The S&P 500 fell 0.5 percent last Friday to end the year at 2,238.83, the lowest since Dec 7.

Currencies

The dollar was down 0.2 percent at 117.37 yen after rising 0.5 percent Monday.
The euro jumped 0.3 percent and the Aussie and kiwi were both up 0.6 percent.
Korea’s won rose 0.3 percent, while Malaysia’s ringgit was down 0.2% at the weakest since 1998. The Taiwanese dollar erased losses to trade up 0.2 percent.
The U.S. currency has climbed against eight of 16 major developed and emerging market peers since Dec. 30.

Commodities

Crude oil rose 0.6 percent to $54.04 a barrel on the New York Mercantile Exchange, close to the $54.51 it reached on Dec. 12, which was its highest level since July 2015.
Gold climbed 0.9 percent to $1,157.41, advancing for the fifth time in the past six trading sessions.
Aluminum added 0.1 percent to $1,694 per metric ton on the London Metal Exchange, while nickel jumped 2 percent to $10,220 a ton.
[Bloomberg]

FTSE 100 Outlook and Prediction

The daily RSI is currently a 80 which is a little concerning for the bull charge at the moment. Whilst not a reversal signal itself (it can stay overbought or oversold for a while) it does indicated that we may well be getting a little bit toppy! We have had a few tests of the 7155 resistance level now so the third test of this is likely to break (probably today) and we are on for a rise towards R2 at 7197. The charts are all bullish to start with, with the 2 hour flashing a buy signal at 7125 overnight – which we have climbed off to retest that 7155 level. Even gold is rising from its recent lows! Whilst this is the first day back it can be good to just the dust settle I am expecting that bullishness from yesterday to continue, at least initially, and am watching 7179 and 7197 as resistance areas. 7170 is the top of the 10 day Raff and we also have a fib level here.

Support wise, we have the daily pivot at 7126,and with the 2 hour chart showing support still at the 7130 area this level might well hold if we do drop back. More major support is 7096 where we have the 20 day Bianca – a break below this would start to turn the table on this bull charge and we should start to drop down towards 7000. The bulls are pretty strong though so it might well take a fair bit of effort from the bears to get that low – probably not likely at the moment.