Coronavirus spreads | 7600 7590 7539 support | 7646 7705 7756 resistance | Buy the dip

Coronavirus spreads | 7600 7590 7539 support | 7646 7705 7756 resistance | Buy the dip

FTSE 100 live outlook prediction analysis for 22nd January 2020

Fears of a new coronavirus in China spooked traders on Tuesday, causing global stocks to pull back after authorities confirmed the illness can spread through human contact. The virus has so far killed six people and close to 300 others have been infected after contracting a never-before-seen pneumonia.

The emergence of the illness stirred memories of the Sars crisis 17 years ago, spreading further concern that it might undercut economic growth.
Investor confidence had already been weakened by ratings agency Moody’s, which downgraded Hong Kong’s rating from Aa2 to Aa3 on Monday. It said its view on the strength in Hong Kong’s institutions and governance is “lower than previously estimated.” The Hang Seng index was dragged 2.8pc lower overnight.

The negative sentiment in Asia spilled over to Europe as stocks closed largely in the red. US equities later joined the slide.

The FTSE 100 pared back some of its earlier losses to end the session 0.53pc lower at 7,610.70 while the midcap FTSE 250 slipped 0.47pc to 21,745.41. The Dax managed to creep up 0.1pc by the close, although the Cac in France remained in the red, down 0.5pc.

Markets Mixed

Asia stocks rallied, recouping some of Tuesday’s sell-off triggered by evidence of the contagiousness of China’s coronavirus and concern with the potential economic implications. Haven assets retreated, while U.S. and European equity futures climbed. Luxury stocks headed for their biggest drop since October on worries the virus will disrupt spending during a key Chinese holiday period. Industrial and consumer shares were among the worst performers as the S&P 500 Index fell from a record high, and the yuan weakened. Elsewhere, Germany’s DAX Index briefly surpassed the peak reached two years ago. West Texas crude held around $58 a barrel as ample global supplies offset the loss of exports from Libya.


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

The bulls have fought back after the test of the 10 day Raff channel yesterday at 7550. Once again the bulls found it as a buying opportunity and we are now back above 7600. As such, that level is now support, with 7590 just below this and if they can break above the 7647 level today we should get a rise towards the next main resistance levels at 7678, and then 7700. With the daily pivot also at the 7599 level then a rise from this area makes sense, especially if the S&P can push past the 3335 level.

Talking of the virus, Coronavirus cases have risen to 440 with the death toll now at 9; US Center for Disease Control and Prevention confirmed the first case in the US.

On the Brexit front the EU is reportedly preparing to offer the UK a trade deal on tougher terms than its deals with other leading trade partners.

If the bears were to break below 7590 then a drop down to the fib level at 7540 is most likely and with the bottom of the 10 day Raff channel at 7555 as well, we may well see another bounce here. As per yesterday though a break of this and we will likely drop down to 7500. The markets seems to have shaken off the latest fearful news though proving decent resilience still!

If the bulls can break above 7705 then 7756 is R3 and the next main area of resistance, along with the top of the Raff channels at 7760 – bit I would be surprised if we got that high today. The trend remains up for the moment, and the dips are still being bought, but a mentioned they need to break 7647 to start with, where we have the 2 hour coral (red) showing a bearish trend.

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