FTSE 100 live outlook prediction analysis for 5th January 2021
Wall Street slid the most in almost 10 weeks on Monday as fears rose amid a surge in Covid cases, while Mervyn King warned of another financial crisis. America’s benchmark S&P 500 pared earlier losses of over 2pc to close down 1.5pc – still the most since the autumn. Volatility gripped markets worldwide, as fears stricter restrictions will dampen an economic recovery fuelled a sell off.
The Cboe Volatility Index – a gauge of expected price swings for the US bourse – surged the most since October.
Meanwhile Mervyn King, governor of the Bank of England during the last financial crisis, warned of another crash in a talk at the American Economics Association annual meeting. He said debt restructuring might be needed to restore the global economy, noting that debt levels relative to GDP are higher than in the run up to the 2008 crash. The sentiment was felt by London’s blue-chips.
An early sharp rise of 3.1pc was dented as the announcement of a national lockdown loomed, with the FTSE 100 paring some gains to close up 1.7pc.
Still, the benchmark added around £30bn in value, hitting its highest level since March 5 in the best session since early December.
Republican Rift
Republican lawmakers in Washington are fracturing over President Donald Trump’s effort to persuade Congress to overturn his re-election defeat, as his allies spar with conservatives who say the Constitution doesn’t give them the power to override voters. Trump further undermined his case after he asked Georgia’s secretary of state on Saturday to “find” the nearly 12,000 votes he’d need to overcome President-elect Joe Biden’s victory in the state – a call some Democrats say would be an impeachable offense. The drama is unfolding on the eve of Senate runoff elections in Georgia that will decide control of the chamber for the next two years.
2021 Bets
After narrowly beating their U.S. peers for the first time in three years in 2020, Asia’s outperformance is seen growing in 2021, according to analysts. They see the MSCI Asia Pacific Index rising about 8% over the next 12 months, versus an estimated 6% gain for the S&P 500 Index.[Bloomberg]
US & Asia Overnight from Bloomberg
Asian stocks were mixed and U.S. equity futures were steady as traders weighed concerns about the impact of rising coronavirus cases and braced for key U.S. runoff elections. The dollar fell and gold held gains.
Shares dipped in Japan on Tuesday but rose in Hong Kong, China and South Korea. S&P 500 contracts fluctuated after the benchmark suffered its worst drop at the start of a year since 2016. European futures slipped. Treasuries were little changed, and the pound recouped some of the losses sparked by England’s third lockdown.
In a surprise U-turn, the New York Stock Exchange said it no longer plans to delist China’s three big telecommunication companies, backtracking on a plan that had threatened to escalate tensions between the world’s largest economies. The firms, China Mobile Ltd., China Telecom Corp. and China Unicom Hong Kong Ltd., rallied in Hong Kong.
Tuesday’s runoff elections in Georgia are set to determine whether Democrats take effective control of Congress, boosting their ability to implement President-elect Joe Biden’s agenda. Traders are weighing scenarios such as the possibility of greater U.S. fiscal stimulus, higher taxes and more regulation if such a “blue wave” materializes.
FTSE 100 Outlook | Trading Signals | Forecast | Prediction | Analysis
Not really much of a surprise hearing that the UK is going back into full lockdown. Should of course have started in December. We are following the usual pandemic pattern perfectly with the second wave likely to peak around early February time. The third wave then should be late this year picking up the anti-vaccers and those that couldn’t be bothered to have the vaccine. At least we should get a summer respite anyway, as the vaccine rollout can hopefully continue apace in the meantime. Most pandemic timelines are 18 months to 2 years, so taking November 2019 as the start point as it started spreading in China, that would fit quite well for the worst to be over by the end of this year.
Anyway, onto the FTSE. I think the market was wrong footed yesterday as we got the post Brexit pump initially but it was expecting the lockdown to come in next week rather than yesterday. As such we sold off, but it may well have been overdone. We have bounced off the 6450 lows and gained a fair bit, and it was interesting that the FTSE was up 1.5% for most of the session, while its peers were down 1.5%. The longer timeframe charts are still bullish and the trend remains up. At least with lockdown in place there will be more free bail out/support money across the board!
Initial resistance is at the 30m coral at 6585 this morning and we should see an initial kick up to that. Above that then the R1 level at 6660 may be on the cards, though we do have the fib level at 6625 which looks like it may well see a reaction today. The R1 level also tallies with yesterdays high. Seems a bit crazy to be looking at a 100 point gain from where we are currently given the backdrop (the media will be over egging the negatives anyway as they are prone to do) but the reality is that its not unexpected, the vaccine rollout is on track and hopefully can ramp up, and the Oxford/AstraZeneca one was approved yesterday. Just got to control the pawns a bit more.
If the bears break below the first support line from the 200ema at 6545 then we are looking at fib support at 6516. Below that then S1 at 6448 is the next level of note. We are also starting to get near the green daily coral support, 6397 for that currently, and we may well see that area hold. The bulls are fighting back on the S&P as well and we are now back above the 3700 level and holding, while gold is still treading water at the 1940 level. Whilst we only got a handful of points on that short yesterday, I still think we may well see a pullback from there before more upside back towards $2000.
The US bulls need to hold that 3700 level today, and they need to break above 3720. A break lower will likely see a slide down to the bottom of the Raff channels at the 3650 level.
Good luck today.
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