Technical analysis for 16th July 2026
We head into Thursday with the markets facing a difficult balance between softer inflation data, improving corporate earnings and another escalation in the Middle East. The latest US inflation figures have helped calm some of the immediate fears surrounding interest rates. Markets now see a much lower probability of the Federal Reserve raising rates this month, which should ordinarily provide a supportive backdrop for equities.
However, oil remains the problem. Brent crude is still trading close to $85 as renewed US strikes on Iranian targets and the disruption around the Strait of Hormuz keep the threat of a wider conflict firmly on the table. That means the market cannot completely relax about inflation.
At the same time, we have seen a sharp sell-off across Asian semiconductor shares. Investors are becoming increasingly concerned about the huge amount of capital being spent on artificial intelligence infrastructure and whether that spending will translate into profits quickly enough.
European futures are relatively steady this morning and US futures are slightly positive, but beneath the surface there is still plenty of nervousness.
The softer inflation numbers remain supportive, but the combination of higher oil and weakness in the chip sector means buyers still need to prove that they are prepared to defend the market.
The overall picture remains constructive for US equities, while the FTSE continues to lag and Gold remains under pressure. The DAX is improving but is still approaching a significant technical decision point.
The overall theme is unchanged from the previous session: US equities continue to lead, with the S&P 500 showing the cleanest trend structure. The DAX is improving but still needs to clear overhead resistance, the FTSE remains range-bound, and Gold continues to offer the clearest bearish technical setup while trading below its falling trendline and moving averages.
FTSE 100 Analysis
The FTSE 100 finished Wednesday slightly lower around the 10,516 area, ending a three-day winning run. Mining and oil-related shares weighed on the index during the session, although the broader market remained relatively resilient considering the renewed geopolitical concerns. The FTSE continues to have an unusual relationship with the oil price. Higher crude can support heavyweight energy companies such as Shell and BP, but it can also increase inflation expectations, weaken consumer confidence and put pressure on the wider equity market. That leaves the FTSE with a fairly balanced outlook this morning.
The broader structure remains constructive, but buyers need to defend yesterday’s lower levels if the index is going to make another attempt towards its recent highs.
- What I’m Watching
- The first thing I want to see is whether the FTSE can hold above yesterday’s low during any early weakness.
- If buyers step in and the index begins forming higher lows, I think we could see another attempt towards the recent resistance area.
- I will also be watching the performance of the energy and mining sectors.
- If oil remains firm and the large energy names start rising, they could provide enough support to help the FTSE outperform the other European indices.
- However, if commodities weaken while the broader risk mood deteriorates, the index may struggle to regain momentum.
- Trading Plan
- My preference is to buy confirmed support rather than chase a strong opening move.
- The ideal long setup would be an early pullback, followed by a bullish reaction and a reclaim of the short-term intraday resistance levels.
- If yesterday’s low breaks cleanly and the market begins forming lower highs, I would step away from the bullish idea and consider selling a failed recovery instead.
- For now, the FTSE remains neutral to slightly bullish while its recent support structure holds.
DAX 40 Analysis
The DAX underperformed yesterday as weakness in the European technology sector weighed on the index.That weakness has continued across Asian markets overnight, where semiconductor shares suffered another aggressive sell-off. The concern is no longer simply whether demand for artificial intelligence technology remains strong. Investors are now questioning whether the enormous levels of spending on data centres, chips and infrastructure will generate sufficient profits. That matters for the DAX because technology and semiconductor-related shares have played an important role in supporting the European market. Germany is also more vulnerable than the UK to higher energy costs, so the continued strength in oil remains another headwind.
- What I’m Watching
- I want to see how the DAX reacts around its recent support zone.
- If the index opens lower but quickly recovers and begins forming higher lows, then yesterday’s weakness may simply have been another temporary pullback.
- However, if the first recovery is sold and the market remains below the overnight breakdown area, sellers are likely to retain control.
- The performance of the European technology sector will be particularly important.
- If chip stocks stabilise after the overnight Asian sell-off, the DAX could recover. If they continue lower, I think the index will struggle to build meaningful upside momentum.
- Trading Plan
- My preference is to sell failed rallies unless buyers clearly reclaim the overnight losses.
- I do not want to chase a large opening drop directly into support.
- The cleaner short setup would be a recovery into resistance, followed by rejection and the formation of a lower high.
- If the DAX reclaims resistance and holds above it, I would step aside from the short side and reassess.
- For now, the DAX looks slightly weaker than the FTSE.
S&P 500 Analysis
The S&P 500 finished Wednesday around 0.4% higher, with strong performances from several large technology companies helping the index overcome weakness elsewhere in the sector. The softer US consumer and producer inflation figures have been helpful. They have significantly reduced expectations that the Federal Reserve will raise rates at its July meeting, while strong results from the major US banks suggest the American consumer and financial system remain relatively resilient. However, the technology picture is becoming more complicated. Large software and consumer technology companies remain well supported, but semiconductor and AI-hardware shares are experiencing significant volatility. That creates a market where the headline index may continue rising even though the performance beneath the surface is much less convincing.
- What I’m Watching
- The first thing I want to see is whether S&P futures can hold yesterday’s gains.
- If the market produces a controlled pullback and buyers defend support, I think another attempt towards the recent highs remains possible.
- I will also be watching the reaction to today’s US retail-sales figures and the latest corporate earnings.
- Strong economic data may support the earnings outlook, but an unexpectedly strong reading could also push bond yields higher and revive interest-rate concerns.
- The performance of the semiconductor sector remains crucial.
- If chip shares stabilise, the S&P should remain supported. If the overnight sell-off spreads into the US session, the index may struggle despite strength in other large technology companies.
- Trading Plan
- My preference remains to buy pullbacks, but I want a clear reaction from support.
- I would avoid chasing the market directly into resistance, particularly while the internal picture remains so divided.
- The ideal setup would be a controlled retracement followed by a bullish reversal pattern.
- If futures lose yesterday’s support and begin forming lower highs, I would become more cautious and wait for the market to establish a new base.
- The broader bias remains bullish, but today requires more selectivity.
Gold Analysis
Gold is trading close to the $4,030 area this morning after slipping back from Wednesday’s recovery. Once again, the price action is unusual given the geopolitical backdrop. Renewed US strikes on Iranian targets, threats against regional energy exports and disruption around the Strait of Hormuz would normally be expected to generate strong safe-haven demand. Instead, the market is focusing on the inflationary consequences of higher oil. If energy prices remain elevated, inflation could begin rising again despite the softer June data. That would increase the possibility that the Federal Reserve keeps rates higher for longer or raises them again later in the year. Higher yields reduce the appeal of holding non-interest-bearing gold. The fact that gold is falling during another escalation in the conflict remains a warning sign for buyers.
- What I’m Watching
- The first key test is whether gold can continue holding above the psychologically important $4,000 area.
- If that level holds and price begins reclaiming the latest breakdown zone, we could see another recovery attempt.
- However, if gold bounces but repeatedly fails below resistance, I think sellers are likely to return.
- A decisive break below $4,000 would weaken the technical picture further and could encourage another wave of momentum selling.
- Trading Plan
- My preference is to sell failed rallies.
- I would rather wait for gold to recover into resistance than chase an extended move lower close to support.
- The ideal short setup would be a bounce, rejection and the formation of a lower high.
- If gold reclaims resistance and begins holding above it despite higher oil and bond yields, I would reassess the bearish view.
- Until then, sellers retain the advantage.
Final Thoughts
Today’s session presents two competing stories. The first is supportive. US inflation has softened, the immediate threat of a July Federal Reserve rate increase has reduced and corporate earnings have generally shown that the economy remains resilient.
The second is more concerning. Oil remains close to $85, the conflict between the US and Iran has intensified again, and investors are questioning whether the huge levels of spending across the artificial intelligence sector can deliver the profits currently priced into technology shares. The FTSE remains relatively resilient and could outperform if its energy heavyweights strengthen, but I still want buyers to confirm support before entering long positions. The DAX looks more vulnerable because of its exposure to both technology weakness and higher energy costs. Selling a failed recovery currently looks more attractive than chasing the index lower at the open. The S&P 500 retains the strongest overall structure, but the divergence between large technology companies and semiconductor shares means the long side requires greater selectivity. Gold remains the clearest bearish market. The inability to attract sustained safe-haven demand during another geopolitical escalation suggests that interest rates and inflation expectations remain the dominant drivers.
Good luck today
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