Technical analysis for FTSE 100 for 8th January 2024
Britain's main stock indexes snapped a string of weekly gains on Friday, marking a grim start to 2024, as investors scaled back bets of aggressive monetary policy easing following better-than-expected economic data. The exporter-heavy FTSE 100 fell 0.4%, under pressure from a stronger pound that tends to hurt shares of dollar earners. The index also fell 0.6% over the week, its first drop in six weeks. After a strong 2023, global stock markets have sold off in the new year as investors re-priced expectations on how many times the U.S. Federal Reserve and other major central banks will cut rates this year. While Wall Street stocks recovered from an early sell-off, which was triggered by a stronger-than-expected jobs data, European markets remained under pressure.
Bond prices slid and a gauge of global equity performance closed a tad higher in choppy trading on Friday after a surprisingly strong U.S. labor report increased the odds that the Federal Reserve can engineer a "soft landing" for the economy. U.S. employers hired more workers than expected last month while raising wages at a solid clip, leading markets to initially dial back bets the Fed would start cutting interest rates in March.
But a weak report from the Institute for Supply Management (ISM) that showed service sector employment plunged to 43.3 in December to the lowest level since July 2020 lifted the rate cut outlook a bit, before settling little changed. The ISM non-manufacturing Purchasing Managers Index fell to 50.6 last month from 52.7 in November. A reading above 50 indicates expansion and one below that number shows contraction.
In Europe, the pan-regional STOXX 600 index closed down 0.27% while on Wall Street, the three main U.S. indices posted weekly losses for the first time in 10 weeks. The Dow Jones Industrial Average rose 0.07%, the S&P 500 gained 0.18% and the Nasdaq Composite added 0.09%. The blistering rally for equity markets at the end of 2023 was based on expectations that the Fed, alongside significant easing by the European Central Bank, would cut rates six times this year.
The monthly nonfarm payrolls report showed the U.S. economy added 216,000 new jobs in December. Economists polled by Reuters had expected a gain of 170,000. The jobless rate held steady at 3.7%, down from most forecasters' expectations for it to rise, prompting concerns that the Fed's long battle to tame inflation may have further to run.
Asian stocks were dragged lower by losses in Hong Kong and China amid concern over tighter regulation on the gaming industry and fears the Chinese government’s efforts to bolster the economy are insufficient. The dollar edged higher. The Hang Seng Tech Index slid as much as 3.3%, putting it on course for the lowest close since November 2022. Heavyweight Tencent Holdings Ltd. dropped as much as 2.4% in Hong Kong even as JPMorgan Chase & Co. said its current valuation is attractive.
Asian shares slipped into the red on Monday as Chinese stocks extended their recent retreat, and investors braced for U.S. inflation data and a corporate reporting season where robust results are needed to justify high valuations.
FTSE 100 technical analysis for today, 8th January 2024
A nice hold of 7650 once again on Friday but the more it is tested the more likely it is to break. We may well see a test of it again today, and a final bounce up to the 7725 area where we have quite strong resistance once again (Thursdays high last week). A bit of a bull Monday, at least to start with. The bulls will certainly be looking to defend the supports but the start of the year can often be bearish as the December rally unwinds a bit.
Below the 7650 level then the next key supports are at 7627 and 7615 - should we see this low then a long here is also worth a go.
Lower down still, then the round number of 7600, but the bears will try and keep the momentum up which would likely see an overshoot down to the 7570 level where we have the lower daily support.
Resistance wise for today, 7702 initially with R1 here, and the round number, then the 7728 key fib above that. Should the bulls go for it today and really pull a bull Monday out the bag then above this the 7765 level is the next one to keep an eye on.
The 2h FTSE100 chart is bearish, whilst the S&P500 is bullish. We may well see that help to pull the FTSE100 up later on. However, German factory orders rose much less than anticipated in November, which is rather a discouraging sign for Europe’s largest economy. That may well present more of a headache for the bulls.
On the Dax40, the bulls will be looking to defend the green 30m coral and daily pivot at the 16560 level initially. If they do so then a rise towards the 16685 level to test R1 and the key fib looks likely.
On the S&P500 I am watching the 4680 and 4666 levels as the key supports for today.
Good luck today.
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