15th August 2019
Strong bearish sentiment and fear broke all the supports, with the Dow having its worst day year to date. 7155 broke late in the day, despite a bit of defence initially, and we have nearly reached the 6th August low at 7061 overnight. In market hours, the FTSE didn’t quite pass its June low, but it got very close — meaning all the summer’s gains have now slipped away. Recession fears sent global markets into another rout, with the ‘risk-off’ approach that has marked recent weeks in full effect.
European and US markets slumped after new data shows Germany’s economy shrank in the second quarter, and an inverted US bond yield curve sparked fresh recession warnings. Stocks were down across the continent as traders fled to safe haven assets such as gold and the Japanese yen in anticipation of an upcoming economic storm.
The US yield curve has inverted ahead of nearly every downturn in the country for the past 50 years, with only one false signal across the period. A downturn typically follows an inversion in the next 12 to 18 months; it last blared a recession warning in 2006, in the run-up to the financial crisis.
GDP data released yesterday showed Germany’s economy is already halfway to recession, after shrinking in the three months to June as global tensions put pressure on its export-driven manufacturing sector.
It was hard to find much to smile about on the FTSE 100 – only 10 companies ending in positive territory after a torrid day for global markets. The blue-chip index ended the day down 1.4pc, or 103 points, at 7,147.9, reaching a five-month low at its close after reacting badly to poor German data and a recession warning signal from the bond market.
News highlights include UK & US Retail Sales, US NY Fed, Initial Jobless Claims, Industrial Production, Manufacturing Output & Business Inventories, Norges Bank & Banxico Rate Decisions
Earnings released today – Walmart, NVIDIA, Carlsberg & Swisscom
FTSE 100 Trading Signals, Forecast and Prediction
That was a very strong down day yesterday however the Asian markets were a bit more resilient. We usually get a consolidation day, and possibly a bit of recovery after such a session and the futures have got back above 7100. We didnt quite reach the 7061 double bottom low for August overnight, but if we see that today, coupled with the fib here, we may see a bounce from here. Probably short lived though as sentiment remains negative. Obviously the 2 hour chart has gone bearish for today with resistance at 7199 and 7220 to start with so worth keeping an eye on these levels if we climb up that far. A test of the 200ema on the 30min chart at 7206 look likely, but markets still remain risk off really after that dubious looking rise to 7730 not so long ago! Gold has managed to hold above the 1500 level for the moment and still looks like it may well be on its path towards 1700 in time.
Cable continues to look weak, with 11700 showing as support – of course as that drops it does help to underpin the FTSE 100 – though there is a long running trend support line at 12000 which is holding for the moment.
If the bulls can defend that 7050/60 area should it be tested then they may well get some breathing space, and it won’t be long before the central banks/Trump/etc start talking it up again and mentioning stimulus/rate cuts/etc
The daily chart remains bearish, with the 7309 and 7348 level yet to be tested since going bearish on 2nd August – any rise towards this area is a decent shorting area, and the Raff channels remain heading down.
Update since writing this earlier – European stocks decline and U.S. equity futures pare gains as China pledges to take countermeasures against planned U.S. tariffs
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