17th October 2018
The bulls had their Weetabix yesterday and despite a little wobble down to 7000 on the FTSE 100, the 7015 long worked really well, with an eventual test of the target area at 7075. The US however had a storming bullish session, as did the Dax (shame that bounced 4 points above my 11605 long order though).
News yesterday showed wage growth has surged to its highest level in more than nine years as the UK’s tight labour market finally starts to boost pay packets. Pay growth excluding bonuses jumped to 3.1pc in the three months to August, its highest level since 2009, but employment dropped for the first time in 10 months.
Unemployment has fallen to its lowest level in four decades but the competition for workers has failed to translate into a pick-up in pay. Bank of England chief economist Andy Haldane declared last week that there were signs of a “new dawn” in UK wage growth after years of stagnation.
An acceleration in real wage growth over the next year “should lift consumer spending and feed through into a pick-up in GDP growth in 2019”, Thomas Pugh at Capital Economics argued.
The pound snapped a three-day losing streak against the euro after the surprise pick-up in pay, rallying 0.4pc to touch above €1.14.
The FTSE 100 lagged behind its rivals after the City’s big international earners were held back by the pound’s gains. Expectations-beating earnings at Goldman Sachs and Morgan Stanley helped bring calm back to global markets, boosting the Dow Jones as much as 1.5pc in intraday trade.
FTSE 100 Trading Signals, Forecast and Prediction
The bulls have managed to pull away from the 7000 level and now need to make it stick. It would appear that we are on track now for a retrace of the recent falls towards the 25ema on the daily at 7276 currently (but dropping all the time) where we may see this bounce end.
The 30minute chart remains bullish for now, as does the 2 hour, and if we get an initial dip this morning down to the pivot at 7058 we may well see this area hold. We had a little bit of a bearish reaction initially yesterday at the 7045 level, but the bears only managed a drop to 7030 from it, therefore that 7045 level should now become pretty decent support if tested. I have gone for the long off the pivot at the slightly higher level though.
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