FOMC this week – weak start strong finish for the week ahead | 7520 7555 resistance | 7421 7370 support

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

Last week, technology shares suffered their worst week since the start of the Covid crisis amid a global return to the office that threatens to derail lockdown winners such as Netflix and Peleton. Netflix shares crashed more than a fifth on its bleakest day of trading for a decade after the streaming giant reported disappointing subscriber growth. The rout helped drive the tech-focused Nasdaq index into its poorest weekly performance since March 2020.

The Nasdaq has now lost 5.4pc of its value since last Monday. It is down 10.6pc so far this month – the biggest rout since 2002, during the aftershocks of the dotcom crash. The FTSE 100 dropped 1.2pc on its worst day since late November amid a wider European sell-off, knocking about £25bn off the valuation of London’s biggest listed companies.

But the FTSE100 is the only major western index that has risen overall this year. The prospect of improving economic conditions mean traders have pursued energy and consumer companies more closely linked to the recovery.

Expectations that the Federal Reserve will shrink its balance sheet and trim back huge monetary stimulus in the face of surging inflation have also hit tech companies.

Meanwhile, U.S. equity futures rebounded Monday and Asian stocks came off session lows as traders weighed the likely impact of Federal Reserve monetary-policy tightening. Treasury yields and crude oil climbed.

Shares eked out gains in Japan and China but technology stocks in Hong Kong retreated. The advance in S&P 500 and Nasdaq 100 contracts stirred tentative hopes of some respite after one of the worst stretches for global shares last week since the pandemic began. European futures wavered.

The Fed on Wednesday is expected to signal a March liftoff in interest rates and balance-sheet reduction later this year to help fight inflation. Ebbing stimulus is forcing a rethink about the economic and market outlook.

How the policy shift will affect fixed income is among the key questions. The Treasury yield curve flattened and the 10-year yield rose as high as 1.78%. The dollar ticked up.

Options Open

U.S. Secretary of State Antony Blinken rejected pressure to immediately escalate sanctions on Russia for its military buildup around Ukraine, saying it would limit western options in the future. Blinken said the U.S. and European allies had focused on building up the threat of “massive consequences” for Russia to dissuade President Vladimir Putin from sending in forces. Over the weekend the U.K. warned that Russia is plotting to install a pro-Kremlin government in Ukraine, leading the Russian Foreign Ministry to issue a statement demanding the Foreign Office “stop spreading nonsense.”

FTSE 100 live outlook prediction analysis for 24th January 2022

The algos defended the 7420 support level from Friday and we have had a decent climb from there to start with on the futures. Likewise the S&P500 has defended the 4391 level and got back above 4420, though the bulls really need to break 4445 to get any further upside from here. As such we may well see a dip again on that before a possible relief rally/short squeeze.

Things continue to ramp up in Ukraine, with the US pulling out their diplomats today. Markets usually rise when war is afoot though! Gold is usually a good front runner and after that recent climb ahead of the index sell off, its now stabilised and in fact dropped off a bit from the 1845 level. If that starts to slide down then we may well see indices climb.

The S&P will likely hold the support at 4390 for the moment, however should that break then a slide down to the 4340 area will likely play out.

For the FTSE100 the bulls will be keen to break above the 2h resistance level at 7520 today. Above that we have a coral at 7560 though that does seem a bit of a big ask for today, but one cant rule out a bull Monday! Bear Tuesday tomorrow for a test of the 7370 ahead of the Fed, then start to climb Wednesday/Thursday is what I am thinking…..

7460 daily pivot is initial support as I am writing this, and that could well be the spring board for a push towards the 7520 area this morning. The markets will be hoping that the Fed help them out later this week as well. Below 7460 then 7420 as mentioned and that held well on Friday and may well do so again, with 7370 the next level below that. The bottom of the Raff channels are still in play and the 10 day is at 7416 for today – lending weight to that 7420 area as well. 7432 for the 20d Raff so it will be interesting to see if this area does hold on any slide down there.

Below 7370 then 7315 is the next level of note and the round number of 7300. The FTSE100 is certainly continuing to hold up well despite the malaise on the US markets. Still think we will see 8000 this year, and a year end around 8500!

So, continue to stay nimble – watch 7463 daily pivot as initial support with 7420 and 7370 below that. 7520 and 7560 for resistance and good luck today!

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