S&P tests 3190 resistance overnight | Bear Tuesday short the rallies | 6220 6143 support | 6330 6406 resistance

S&P tests 3190 resistance overnight | Bear Tuesday short the rallies | 6220 6143 support | 6330 6406 resistance

FTSE 100 live outlook prediction analysis for 7th July 2020

Here’s a quick recap of yesterday:

  • It positive day for London stocks, which chalked up solid gains as investors bet on a new wave of relief from governments and central banks to help tackle the ongoing economic effects of Covid-19.
  • There was a similar story across the continent.
  • The pan-European Stoxx 600 touched its highest level in the month, with Germany’s DAX and France’s CAC both rising solidly.
  • European technology shares became the first sector to recoup losses from the widespread and severe market drop that started in February.
  • Better-than-forecast data on US jobs creation and factory activity have also provided a boost to confidence, as have hopes for a vaccine, which observers say is key to kickstarting any recovery.
  • Key European markets posted gains of 1.5 percent or more at the close while on Wall Street, the Dow Jones was more than 350 points higher in the late New York morning

The FTSE 100 closed 2.09pc higher to 6,285.94 today as the bullish sentiment from China spilled over to the west. The domestically-focused FTSE 250 climbed 1.43pc to 17,550.03. In the eurozone the Frankfurt DAX and Paris CAC closed 1.64pc and 1.49pc respectively. The easing of lockdowns is providing hope the global economy will bounce back from an expected recession this year, with England’s pubs reopening at the weekend and tourist attractions around Europe now either open or planning to.

Hardline on Hong Kong [Bloomberg]

The establishment of a Chinese national security office in Hong Kong last week — complete with all staff accountable to Beijing — is the culmination of a unprecedented push to take more hands-on control over the former British colony. Hong Kong’s chief executive, while still nominally the top decision-maker on most local issues, will now be more closely supervised by several officials who have come up through the Communist Party ranks on the mainland. The new appointees have hardline credentials, including a former aide to President Xi Jinping known for removing crosses from churches and a former party official who once joked that if the foreign media could be trusted, pigs could climb trees. So who are they? Here’s a look at China’s new national security team in Hong Kong. Meanwhile, China also warned the U.K. it will face “consequences” if it chooses to be a “hostile partner” after it emerged Prime Minister Boris Johnson is preparing to begin phasing out the use of Huawei equipment in British 5G telecommunications networks as soon as this year. Beijing has also refused to rule out blocking Hong Kong citizens from leaving to take up Johnson’s offer of a new home in the U.K. It’s not much better within China, where Beijing police arrested an outspoken critic of Xi on Monday.

Markets Mixed [Bloomberg]

Asian stocks looked set for a mixed start Tuesday after strong gains Monday that were carried into the U.S., while the dollar fell for a fifth day. Futures dipped in Japan and pointed to a modest rise in Hong Kong and Australia. The S&P 500 rallied for a fifth session, with tech gains pushing the Nasdaq Composite to a record high. Amazon shares rose past $3,000 for the first time, while Tesla extended a five-day rally to more than 40%. Treasuries dipped, and the dollar slid to the weakest since June 10 as risk-on sentiment sapped demand for havens. Elsewhere, copper was on the cusp of erasing this year’s losses after virus-related disruptions tightened supplies. Oil edged lower with investors concerned that lackluster demand through the summer months will weigh on the market’s recovery.

FTSE 100 Outlook | Trading Signals | Forecast | Prediction | Analysis

The global equity rally paused Tuesday after a strong start to the week Monday, with the notable exception of further gains in China. The dollar pared losses. The Shanghai Composite climbed for a sixth day, bringing this month’s gain to around 13%. Stocks retreated in Japan and South Korea, and fluctuated in Australia and Hong Kong. S&P 500 futures slipped after the benchmark closed higher for a fifth session, with tech gains pushing the Nasdaq Composite to a record high. The dollar remained close to its lowest since early June, while Treasuries were little changed. The offshore yuan strengthened briefly through the 7 per dollar level for the first time since March before paring gains.

Overnight the S&P managed to test the 3190 resistance level and we have had a decent reaction there with a drop off to 3169 as I write this. The bears may well be aiming to take that down to 3148ish where we have the 2 hour coral for support, and that may well follow through to the FTSE 100 with a drop down to the first support area at 6220 this morning.

The FTSE has also dropped off its fib resistance at 6313 overnight, though with the bulls breaking above the 6290 level yesterday then we should, in theory, get a rise towards R1 and the daily resistance level at the 6340 area today. I would expect a bit of a drop off there though, especially if the S&P cannot push above 3190. If it does then 3229 is the next level to watch for. That could well coincide with the top of the 10 day Raff on the FTSE too at 6406, though the FTSE bulls will need to break above the 6340 resistance level for that to take place.

After bull Monday yesterday usually comes bear Tuesday and I am looking to short the rallies today, ideally at the 6330 area. It will be interesting to see if the bulls defend the 6220 support area this morning as well as a break of the pivot at 6263 will likely lead down to there and a test of S1. We also have the 200ema and a fib level here. Should the bears break below the 6220 level then 6135 is Fridays low and next support and then if we break that, we will finally get a test of the daily coral below that which is at 6064 for today. Make or break area for the bulls there as it would get pretty bearish if we go back below there.

So, expecting a bearish day today and shorting the rallies feels the right play. We may well see another test of the 3190 S&P level in hours, and set up a decent double top there to reload a short. Good luck today.

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