FTSE 100 live outlook prediction analysis for 19th August 2020
US markets hit a new record high on Tuesday night as investors shrugged off the economic devastation caused by Covid-19. The S&P 500 closed at 3,389.78, above its previous peak of 3,386.15 in February. Earlier in the day the benchmark index touched an intraday high of 3,395 points. Wall Street has been on a near-relentless rally in recent months, lifting the S&P by more than half since virus panic triggered the fastest sell-off in history in February and March.
The rebound suggests traders are still predicting a fast “V-shaped” recovery in the world’s largest economy, in spite of millions of job losses and fears that a second wave of infections could trigger further crisis. Better than expected data on US housing starts and building permits gave stocks the extra push needed to break the record after a week hovering just below it.
Here’s how things finished up in Europe yesterday…
- The FTSE 100 was hurt by the strength of the pound, ending 0.95pc lower to 6,069.33 while the FTSE 250 fell 0.84pc to 17,623.02.
- Some of the biggest fallers were GlaxoSmithKline, AstraZeneca, British American Tobacco and Unilever which all earn a large chunk of their revenue overseas.
- Tensions between the US and China heightened again as President Trump has tightened restrictions on Huawei. The US leader wants to limit the Chinese company’s access to US-produced chips.
- The DAX managed to end relatively flat considering Germany as seen a large jump in the number of new Covid-19 cases – its largest daily increase in nearly four months.
Record High
U.S. stocks completed their fastest-ever return to a record after a drop of at least 20%, surpassing February highs for the first time since the pandemic upended financial markets. The dollar fell to the lowest in more than two years, while Treasuries advanced. S&P 500 futures opened flat in Asia. The S&P 500 eked out a gain, capping a 52% rally from its March low. Technology shares pushed the gauge above its Feb. 19 closing record after failed attempts in three of the past four sessions. Homebuilders also rose as a report showed housing starts increased the most since 2016. Futures indicated a muted start in Asia as the Trump administration warned U.S. colleges to divest of Chinese stocks. Gold was back above $2,000 an ounce. In contrast to the buoyant moves in stocks, currency traders are anxious about the unknowns of the coming months and their impact on the dollar. The correlation between currency and stock volatility fell below zero this month to the lowest since 2009.[Bloomberg]
Divesting China Stocks
The U.S. State Department is asking colleges and universities to divest from Chinese holdings in their endowments, warning schools in a letter Tuesday to get ahead of potentially more onerous measures on holding the shares. “Boards of U.S. university endowments would be prudent to divest from People’s Republic of China firms’ stocks in the likely outcome that enhanced listing standards lead to a wholesale de-listing of PRC firms from U.S. exchanges by the end of next year,” Keith Krach, undersecretary for economic growth, energy and the environment, wrote in the letter viewed by Bloomberg. U.S.-China tensions are rising as the American presidential election looms: On Tuesday, President Donald Trump said he called off last weekend’s trade talks with China and that Beijing’s handling of the coronavirus is “unthinkable.”[Bloomberg]
FTSE 100 Outlook | Trading Signals | Forecast | Prediction | Analysis
The dollar steadied near a more than two-year low while Asian stocks were mixed despite a record close for their U.S. peers. The morning session for Hong Kong’s equity market was canceled due to a typhoon.
Shares rebounded in South Korea from Tuesday’s slide, were little changed in Japan and climbed in Australia. Chinese shares slipped amid a request from the Trump administration for U.S. colleges to divest them. S&P 500 futures were steady after the gauge eked out a gain to close above the previous Feb. 19 all-time high. European contracts pointed to modest gains. Traders in Hong Kong are expecting the equity market to reopen later Wednesday. Treasuries ticked higher.
We certainly dropped off the 6165 resistance level yesterday, seeing nearly 100 points shed. The good news was the 6060 support level held yet again though and we got another rise from it. Today we have the key fib level just below this at 6053 so any early weakness to here may well see this hold. Below this then the 6022 level is the next support and then the round number of 6000 and S2 at 5994.
The ASX200 put in a decently bullish rise today and we may well follow suit. Especially if the US pushes on further. Overnight the S&P has tested the 3399 resistance level that we have been looking for for a while now, and not had that much of a reaction there so far. If the bulls can push through that today then we should see more record highs to around the 3426 level where we have R3 for today. Can they keep the momentum going and lend weight to the V shaped recovery thats being mooted? Also helps to get the prices up before the West heads into Winter flu season…… and then the possible uptick in cases putting the cat amongst the pigeons.
For the FTSE bulls initial resistance is at the 6115 level where we have the 200ema on the 30min chart, and then yesterday’s high at 6165 above that. 6207 is next up and if we track the US then I have a feeling that we may well rise to this level today, and we also have the daily coral right on this line as well. As such, its still buying the dips for the moment as the trend remains bullish. Above 6207 then we have some key daily resistance at 6249 and we may well see the hulls stutter in this area. 6250 is also R3 for today, so should we have a mega bullish day and get to this area I would be looking to short here. That may well tally with the S&P hitting the 3430 daily resistance that it seems to be aiming for at the moment!
The bulls do have their work cut out as the drop off 6165 yesterday showed that the bears still have some fuel in the tank. Cable did play a part though as the strength of the pound helped fuel that drop.
So, looking at 6053, 6037 and 6022 as the main supports for today, with 6115, 6165, 6207 and 6250 as the resistance levels to watch. Good luck today!
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