FTSE100 Analysis | Signals | Forecast | Prediction | FTSE 100 Outlook | Trading help
Commodity and financial stocks dragged the FTSE 100 lower on worries about a slowdown in global economic growth. However, a jump in AVEVA Group on buyout news and a weaker pound helped limit losses on the exporter-heavy index. The blue-chip index edged down 0.2pc for a third consecutive session of losses, while FTSE 250 reversed an earlier drop to a new five-week low to close flat.
Asian share markets were broadly positive while the dollar was slightly weaker on Thursday, with investors nervously awaiting the U.S. Federal Reserve’s annual Jackson Hole conference for clues on how sharp future interest rate hikes might be.
Morning trading in Hong Kong was scrapped due to a storm. US futures pushed higher in the wake of positive closes for the S&P 500 and Nasdaq 100.
MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.3%, after U.S. stocks ended the previous session with mild gains.
Australian shares climbed 0.7%, while Japan’s Nikkei stock index rose 0.52% and China’s CSI300 advanced 0.27%.
The Federal Reserve’s annual monetary policy conference in Jackson Hole, Wyoming is due to start on Friday. Investors now expect the Fed Funds rate to peak at 3.80% in March 2023, up from 3.62% a fortnight ago
Interest rate futures imply a 60% chance of a 75 basis point Fed hike in September, up from 50% earlier this week.
In early Asian trade, the yield on benchmark 10-year Treasury notes rose to 3.1095% compared with its U.S. close of 3.106% on Wednesday. The two-year yield, which rises with traders’ expectations of higher Fed fund rates, touched 3.4028% compared with a U.S. close of 3.386%. The yields had also made gains overnight, though that did not stop U.S equity markets rising on Wednesday.
The Dow Jones Industrial Average closed up 0.18%, the S&P 500 gained 0.29% and the Nasdaq Composite advanced 0.41%.
New Measures
China is planning a slew of measures to stabilize growth as the economic recovery shows signs of slowing from repeated Covid lockdowns and the crisis in the country’s property sector. The State Council has readied a 19-point package, according to state broadcaster CCTV, pledging to use “tools available in the toolbox” and not flood the economy with excessive stimulus. To add to the economy’s Covid and housing woes, China is now being hammered by severe drought which has dried up rivers, closed factories and strained power grids.
The Power of Powell
No one knows for sure what Federal Reserve Chair Jerome Powell will say in his speech on monetary policy at Jackson Hole tomorrow. One thing is clear, though: the potential for a marketwide shock is sky high. Stocks, bonds and commodities are moving in lockstep, their unified swings turning almost exclusively on views as to whether the central bank will cause a recession. Across assets, the utmost focus is the trajectory of inflation and the Fed’s plan to tackle it.
FTSE100 live outlook prediction analysis for 25th August 2022
It’s all eyes on Powell once again and we may well see a buy the rumour, sell the news type of pattern play out ahead of Jackson Hole. The dip down to 7410 and subsequent climb yesterday was a bit of a cheeky stop hunt which suggests that we will probably see some more upside, especially as we are back knocking on the door of 7500 this morning.
Initially I am thinking that we will get a rise towards the 7510 R1 level, as we also have the key fib here, the round number and also a red 2h coral resistance line. This may well see the bears have a go here for a drop down to the daily pivot and green 30m coral at the 7460 area. If that plays out then a bounce here would make sense, and a rise back to 7510 and higher would be good to see. Feels like buy the dip today.
The bulls will still be aiming for the 7600 area, and we have R3 at 7596 today, though adding 100 from where we are as I write this maybe a big ask. That said, China is leading the way with stimulus measures and the West may well follow suit, not least with energy support for the masses. A cap of £2000 has been mooted, probably tied in with a usage cap as well, with the deficit to be clawed back in future tax take. We shall see, but one thing’s for certain, millions won’t be able to pay £6k a year to run a two bed semi!
For the bears they will be looking to break the 7459 daily pivot as that will open up a retest of that low from yesterday at 7410, though S1 at 7423 is also just above this. 7475 is now the 2 hour support level as well from the Hull moving average so I think that the bulls may well have it today, especially as we have bounced so well from the 7410 already.
S2 is at 7372 as the next key level down but I dont expect to see that today. The 10d Raff channel has levelled off following the recent bearishness form the 7570 level, though the 20d Raff remains heading up. The S&P still looks bullish as well, and where that leads the others follow generally!
Good luck today.
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