ECB tomorrow so buy the rumour | Stimulus expected | 7335 7390 resistance | 7260 support | Trading discussion

ECB tomorrow so buy the rumour | Stimulus expected | 7335 7390 resistance | 7260 support | Trading discussion

11th September 2019

  • Markets spent much of the day listless as investors play wait-and-see with European Central Bank decision on Thursday
  • Unemployment falls to lowest since 1974 and wages grow against expectations
  • Europe opens downbeat, Asian markets mixed with falls in China
  • China’s producer price index fell at sharpest rate since August 2016

A late rally was enough to lift things broadly positive after a flat day. Sterling and the FTSE 100 both closed up, a fairly rare occurrence given recent turbulence. Today is likely to see stimulus fever crank up as investors look ahead to the European Central Bank’s meeting. It’s a quieter day on the corporate and economic fronts for the UK, though the sword of Damocles (i.e., an actual Brexit development), hangs over us as ever.

Brexit

UK MPs seeking to block a no-deal are reportedly examining ways to bring back a version of former PM May’s Brexit deal with a 2nd referendum attached.

Bolton Out

Hawkish U.S. national security adviser John Bolton has been ousted. President Donald Trump tweeted that he had fired Bolton after disagreeing “strongly” with many of his positions and that he would announce a successor next week. Minutes later, Bolton contradicted the president on Twitter, saying that he had offered to resign Monday night and Trump deferred the discussion. Bolton was known for his hardline approach to U.S. adversaries, including Iran, North Korea and Venezuelan President Nicolas Maduro. His departure is a boon for Secretary of State Michael Pompeo, who had clashed with the national security adviser and now assumes an unchallenged role as Trump’s closest adviser on foreign policy.

Tech Weak Link

U.S. senators are concerned about whether American export controls are strong enough to prevent China from getting sensitive American technology through Hong Kong. “We believe it is critical that the United States take appropriate measures to ensure China does not abuse Hong Kong’s special status under U.S. law to steal or otherwise acquire critical or sensitive U.S. equipment and technologies,” a bipartisan group of senators wrote in a letter to Michael Pompeo and Secretary of Commerce Wilbur Ross. Intellectual property theft and the drive for technological dominance are key issues in Trump’s trade war with China. Members of Congress also raised concerns that the Chinese government is using technology to suppress dissent in Hong Kong.

Market Open

Asian equity markets eventually traded mostly higher as the region shrugged-off the indecision from Wall St. Treasury yields rose for a fifth day. The Dow Jones Industrial Average closed positive, while the S&P 500 was little changed and the Nasdaq ended in negative territory as investors continued to gravitate toward value shares. The Dow had briefly turned up midday following a report that China is ready to buy more U.S. agricultural products. China is ready to sweeten deal by buying American goods in countdown to trade war talks according to SCMP sources. The pound fluctuated as embattled British Prime Minister Boris Johnson insisted he won’t ask for another Brexit delay, while most euro-zone sovereign bonds nudged lower as European Central Bank officials prepare to meet. Elsewhere, oil plunged after Trump fired Bolton, though erased the declines after the release of bullish U.S. inventory data.



FTSE 100 Trading Signals, Forecast and Prediction

The FTSE 100 had a decent boost at the end of the session yesterday after treading water for most of the day, and as such the 7340 resistance area remains relevant and worth watching for. Having held the 7200 level yesterday we are seeing some optimism on the charts. How long will it last though… (probably not that long as still thinking there is a leg down brewing shortly, as we have had our late August/early September bounce).

FTSE 100 Trading Signals, Forecast and Prediction
FTSE 100 Trading Signals, Forecast and Prediction

We have the ECB tomorrow and the much talked about stimulus measures are likely to be at the forefront of everyones minds. Will the talk become reality and if so we may see a short term boost to equities. Buy the rumour, sell the news again really.

Gold has dropped off that 1500 level and still running half the short from 1498 with the stop at breakeven. There is support around the 1475/1470 area if the bears were to break below 1483 where we have the bottom of the 20 day Raff channel for today.

The FTSE has the daily coral for resistance at 7320 and that hasnt been tested since going red, so we may see a reaction around this level. With the strength yesterday the 2 hour chart has gone bullish with 7250 as support and if we were to dip down to this 7250/60 area then I would like to see it hold. If the bears were to break below that then a drop down towards the 7200 level looks likely again, as well as that daily support at 7175.

Keep watching cable and the Brexit news flow, both of which are driving the FTSE 100 at the moment.

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