FTSE 100 Analysis | Signals | Forecast | Prediction | FTSE 100 Outlook | Trading help
The FTSE 100 pared losses yesterday to end flat as gains in cyclical and energy stocks countered underwhelming production updates from mining companies, while gains in airline stocks and brick maker Ibstock helped the midcap index stay afloat. Consumer staple names Unilever, Diageo, British American Tobacco and oil majors Shell and BP among top gainers. Was a different story after the bell though as the S&P500 dropped off its 200dma hard, and fell over 100 points, dragging the FTSE100 down to the 25ema at 7535, and then 7513 overnight. Can the bulls fight back today?
U.S. stocks slid in a dramatic reversal and the selloff in Treasuries resumed, as traders braced for the possibility of more aggressive policy tightening by the Federal Reserve. Fed Chair Jerome Powell outlined his most aggressive approach to taming inflation to date, potentially endorsing two or more half percentage-point interest-rate increases while describing the labor market as overheated.
Stocks, U.S. equity futures and sovereign bonds fell Friday as the prospect of one of the most aggressive Federal Reserve monetary tightening cycles in recent history sowed more market discontent.
An Asian share gauge sank about 1% to a more than one-month low, sapped by Japan and Hong Kong. S&P 500, Nasdaq 100 and European contracts were also in the red. Energy and technology equities led the U.S. lower Thursday.
China’s economy-sapping Covid lockdowns weighed on the nation’s equity bourses. Beijing’s vow of market stability has so far failed to revive sentiment much. The latest step was a statement from the securities watchdog urging institutional investors to buy more domestic shares.
Shorter maturities paced a retreat in Treasuries on the prospect of three consecutive half-point Fed interest-rate hikes, which would be the sharpest tightening since 1982. Fed Chair Jerome Powell signalled increases of such increments are possible and favoured the idea of “front-end loading” moves.
A portion of the Treasury yield curve inverted again. That may indicate worries about whether the Fed’s campaign against price pressures — which have been stoked in part by Russia’s war in Ukraine — will tip the world’s largest economy into a downturn. Bonds in Australia and New Zealand declined.
The dollar rose, the yuan weakened and oil dipped below $103 a barrel. Energy costs are still elevated due to the supply challenges emanating from the Ukraine conflict, but on the flip side slowing U.S. and Chinese growth could curb demand.
Central bankers are stepping up efforts to quell some of the highest inflation in a generation. That shift is sapping investor sentiment, stoking market volatility and eclipsing a robust start to the corporate earnings season.
Earnings, Fed
About 80% of U.S. firms reporting earnings so far beat estimates. Tesla Inc. was among them, gaining on record profits. Separately, Tesla Chief Executive Officer Elon Musk is also lining up financing for his Twitter Inc. takeover bid.
Traders have ramped up bets on Fed hikes, but there could be further to go: Nomura Holdings Inc. now expects the Fed to raise rates by 75 basis points at both its June and July meetings, following a 50 basis point hike in May.
Weapons for Ukraine
U.S. President Joe Biden announced he’s sending $1.3 billion in additional weaponry and economic aid to Ukraine and that he had asked Congress for even more money. Of the new package, $800 million will go toward arms, including dozens of howitzers and the new fast-tracked-for-Ukraine “Phoenix Ghost” drones. Biden also said no Russian-flagged ships would be allowed into U.S. ports, following a move by European countries. Ukraine’s prime minister said that rebuilding the shattered country will cost $600 billion.
FTSE 100 live outlook prediction analysis for 22nd April 2022
The drop last night after Powell’s comments certainly took the wind out the bulls sails, even more so on the S&P. The FTSE100 lost the 7600 level having managed a high of 7660 (teased the 7670 short order!). That said, I was also looking for a drop back to test the 25ema on the daily around the 7535 area and we have managed that overnight. It will now be up to the bulls to defend this!
Initially today we may see a bit of the fall get retraced and a rise to test the new 30min resistance levels across the board, and the daily pivots also at 7585, 14411 and 4429 on FTSE100, Dax and S&P respectively.
With the fall yesterday the 2h charts have also gone negative and key levels on that for resistance are at the 7618, 14400, and 4454 so again, keep an eye on these today.
As it’s a Friday though so worth being a little bit more risk off in terms of stake size. On the news front we have the UK PMI data (manufacturing and services) out at 09:30 and will be looking for readings above 50. A reading above 50 indicates that the services sector is generally expanding; below 50 indicates that it is generally declining.
For today I would like to see the FTSE100 pull away from this daily support level at 7535 to start with and get a rise towards the 7585. Above that then the bulls would be keen to recapture the 7600 level once again, however the 200ema is at 7599 on the 30m, so we may well see them come up against a bit of a brick wall here. If so then another leg down to retest the 7535 in hours could well play out. Another reason for a possible rise is that the S&P is testing its daily coral (green) for the second time here at 4382 which may help pull the FTSE up if that retraces some of yesterdays fall. We climbed well off the first test of the green daily coral on Monday at 4382.
Above 7599 then 7632 is the next key area with at the fib and R1 here. Seems a big ask to rally 100 after that drop yesterday but we still have the low volume today (should be more “normal” next week) plus a Friday so not totally impossible.
For the bears they will be looking to break the overnight low at 7515 and we also have S1 here. If they where to do so then a slide down to the 7434 daily coral may well play out fairly easily. A break of that gets things really bearish though…..
S&P500 & Dax40
Again, simply looking at a rise to the daily pivot and then a drop off from there as you can see in the charts below and the trade plan. Watching those key levels mentioned at the start of this email section.
Good luck today and have a great weekend.
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