14th January 2019
Friday saw the FTSE 100 nearly manage the 7005 resistance level, the bears stopping the rise at 7003.5 instead, and then dropping back towards 6900. Overnight we have seen a low of 6877 with S1 at 6875 providing the initial support. The bulls will be keen to see 7000 again but we now have resistance at 6962 in the way after Friday’s drop.
Friday Overview
A week-long rally on global markets was halted by mounting worries over the government shutdown impasse in Washington and oil prices snapping their longest winning streak in almost three years. The stocks surge, which has been fuelled by cooling trade tensions and signs that the US central bank will pause its policy normalisation plans, ended as attention started turned to the US government shutdown and the crucial Brexit vote in Parliament next week.
Wall Street headed lower for the first time in a week after Donald Trump ended shutdown talks with the Democrats. The row over funding for the US president’s wall along the border with Mexico could force Mr Trump to declare a national emergency to circumvent Congress with the shutdown threatening to become the longest in US history.
Meanwhile in London, sterling spiked on currency markets after a report claimed that ministers believe Brexit could be delayed if Parliament votes down Theresa May’s deal on Tuesday. The pound’s 1pc rally against the euro to €1.1197 put pressure on the sinking FTSE 100 as the index closed 0.4pc lower.
Tough times for Europe
Fractures in European politics are deepening. In the euro area’s latest sign of political instability, Greece’s Prime Minister Alexis Tsipras will call a confidence vote after a key coalition partner withdrew its support over a naming dispute with Macedonia. The vote could trigger an early election and end the leftist leader’s four years in power. In France, anti-immigrant leader Marine Le Pen started her party’s campaign for EU Parliament balloting in May, which may be viewed as a referendum on President Macron. And in the U.K., Prime Minister Theresa May faces defeat in Tuesday’s Brexit vote. On Monday she will make an 11th-hour appeal, warning that Parliament risks blocking Brexit and undermining democracy, rather than causing Britain to leave the EU without a deal. Opposition leader Jeremy Corbyn has indicated that his party is ready to call a no-confidence ballot, which could lead to a general election.
U.S. Recession Risk
Many financial markets are already signaling that the U.S. is more likely than not hurtling toward recession. The question is whether they will prove prescient or overly fretful. The prospect of a widespread yield inversion in the Treasury market has generated the most alarm: it’s a signal that has preceded U.S. downturns for more than half a century, and is now edging even closer to fruition. But there are other causes for concern. Riskier assets from stocks to credit took a hit in late 2018, while Bank of America’s recession indicators have jumped in recent weeks and Goldman Sachs’ market-based model puts recession odds at 50 percent. Meanwhile, Jeffrey Gundlach has said yet again that the U.S. economy is gorging on debt. The investment manager countered President Donald Trump’s claim that he’s presiding over the strongest economy ever, arguing that the growth is debt-based.
FTSE 100 Trading Signals, Forecast and Prediction
For today I am looking at the support area at 6860/6870 to hold initially this morning. We have the usual politics backdrop resuming this year now, pretty much on the same note as we ended 2018 – backstabbing, posturing, can’t agree on anything, etc etc! Corbyn’s latest is a no confidence vote and calling for a GE. Shame they don’t put their heads together, get on the same page, thrash out the deal and talk up Britain for once. Politicians eh…..
If the 6860 support area does hold then I am looking at a rise today towards the 2 hour resistance level at 6960 where we have moving average resistance. As mentioned above, the bulls will be keen to break above 7000 again and may well see that this week, probably from Wednesday onwards. The daily FTSE chart has remained bullish, and the moving average support from that is at 6827 for now, and still looks like a decent swing level as mentioned on Friday. If the bears were to break below the 6860 level then we will more than likely see a drop down to this level so bear that in mind. Below that then 6775 is the next area of note, but I am more inclined to think that we see a rise from the 6825 area if seen.
If the bulls were to break above the 6960 area then we have Fridays level of 7005 still in play as resistance and looking fairly key. Above this then 7050 is resistance, with the top of the Raff channels up at 7080 and 7120 and an area that the bulls will be keen to push up to.
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