Quote from Nick on 31st January 2019, 11:29 am

31st January 2019

The FTSE 100 doubled its 2019 gains in one trading session as the pound struggled to recover from its post-Brexit vote slide and iron ore prices surged. Sterling's rebound faltered following another night of drama in Westminster as resolute EU leaders refused to reopen Brexit talks. The pound has slipped 1pc versus the euro since yesterday afternoon's high, dropping to €1.1435 after MPs failed to take a no deal Brexit off the table.

The pound's 2019 rally being derailed helped the FTSE 100's overseas earners strengthen while metals markets continued to be gripped by the fallout from the Vale dam disaster. Iron ore giant Vale pledged to cut production by 10pc as it decommissions tailings dams following the fatal breach at its mine. Iron ore futures in Singapore surged as much as 10pc following the decision, boosting FTSE 100 producers Rio Tinto and BHP Billiton.

Fed Adopts Patience

The Federal Reserve said it will be “patient” on any future interest-rate moves and signaled flexibility on the path for reducing its balance sheet, in a substantial pivot away from its bias just last month toward higher borrowing costs. The Federal Open Market Committee “will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support” a strong labor market and inflation near 2 percent, the central bank said in a statement Wednesday following a two-day meeting in Washington. In a separate special statement on Wednesday, the Fed said it’s “prepared to adjust any of the details for completing balance sheet normalization in light of economic and financial developments.” The central bank also said it would be ready to alter the balance sheet’s size and composition if the economy warrants a looser monetary policy than the federal funds could achieve on its own.

Stocks, Treasuries Advance

Stocks in Asia rose after U.S. shares soared and the dollar tumbled in the aftermath of the Fed meeting. The S&P 500 Index rallied to an eight-week high, the Dow Jones Industrial Average jumped 400 points and the Nasdaq 100 Index added more than 2.5 percent, while the dollarweakened to a four-month low. Major equity gauges were already higher on the day as technology shares rallied after Apple Inc.’s results beat estimates and Boeing Co. helped boost industrial stocks. The Treasury yield curve steepened as the two-year rate sank while the 10-year level fell less sharply. Elsewhere, iron ore surged after Brazil’s Vale SA, the world’s largest producer, outlined plans to cut output after a deadly dam breach. Oil rose above $54 a barrel as a government report showed a steep drop in imports from Saudi Arabia.

Trade Talks Begin

The U.S. and China launched high-level trade talks in Washington with little indication that Beijing will bend to U.S. demands to deepen economic reforms. Talks between senior officials from the two sides, led by U.S. Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He, at the White House complex in Washington that began on Wednesday morning were expected to be followed by a working dinner. Negotiations will resume Thursday, when President Donald Trump is expected to meet Liu. It’s the highest-level talks since Trump sat down with Chinese President Xi Jinping in Argentina on Dec. 1 and declared a 90-day truce to reach a lasting deal to end the trade war. While a breakthrough deal is seen as unlikely from this round of negotiations, the White House has said a concluding statement will be released on the progress they’ve made on core issues such as Chinese technology transfers and intellectual property practices, market access and Beijing’s pledge to buy more American goods.

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FTSE 100 Trading Signals, Forecast and Prediction

We ended up having a decent rise yesterday and fuelled by a dovish Fed we passed the 6940 resistance area to see an overnight high of 6968. Yesterday's closing price was 6942 so we have a bit of extra support here to start with today, however the ASX20 (Australia) had a dip and rise day and we may well see something similar. I am looking at the 6990 level as the main resistance level with 7007 above this for today. For support, below 6940 I am looking at the 6885 area.

We have a bullish 2 hour chart still following this weeks rises and the moving average that I watch on that is steadily rising as well. It is currently at 6865 as I write this but if the FTSE 100 price dips later and it continues to rise they may well meet at the 6900 area or just below. As such if we do get a dip today then entering a long around this area would make sense. The daily chart is also bullish still, with support at 6860. The bulls will certainly be keen to defend any dips as they have brought the market up a lot in January, especially this last week! There were a lot of bears shorting the break of 6800 who I expect are frantically short covering or being squeezed at the moment!

[caption id="attachment_14548" align="aligncenter" width="821"] FTSE 100 Trading Signals, Forecast and Prediction[/caption]

In yesterdays's press conference the Fed stood pat on rates whilst indicating a willingness to adjust the pace of the balance sheet run-off, the message of patience was reiterated, and language on the balance of risks was dropped.As such, markets reacted favourably and I still think that the messages of doom and gloom for 2019 are overdone, though we are still seeing a slow down in a lot of areas. Probably needed anyway! Microsoft results are out tonight and will provide further information on the tech stocks health overall.

So, generally still feeling bullish and now we have hit the 6950 area, we may see a little bit of a dip back down ready for another assault on 7000 and maybe higher. There is fib resistance at 6980 initially with 6990 looking key above that, with 7007 as the recent high. We are however at the top of the 10day Raff channel with resistance at 6970 first thing today as well. Staying bullish as the sentiment but also watching the resistance levels closely once again.

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