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Brutal day Tuesday with more to come | 7350 7250 7123 support | 7428 7475 resistance | bearish!

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

The FTSE 100 closed in the red after inflation jumped 9pc last month, fuelling fresh worries about the economic toll from surging prices. The index closed 1.1% lower at 7,438, snapping a three-day winning streak.

Rishi Sunak has vowed to cut taxes on business as the British economy teeters on the brink of recession in the face of the cost of living crisis. In a speech, the Chancellor urged companies to increase spending to prevent a sharp downturn and pledged to slash the tax burden to help them do so.

Stocks slid Thursday on fears of an economic downturn, though cooling demand for havens like bonds hinted at slightly steadier sentiment.

An Asia-Pacific equity index shed about 1.5%, led by losses in Japan and in Chinese technology firms. US and European futures wavered but came off session lows as traders evaluated whether a 4% plunge in the S&P 500 index -- the biggest daily drop in almost two years -- might give way to dip-buying.

Earnings reports Tuesday from US consumer titans stoked worries that high inflation is weighing on margins and consumer spending. Target Corp. sank the most since Black Monday in 1987, a day after Walmart Inc. also spiraled lower.

Federal Reserve officials reaffirmed that sharply tighter monetary policy lies ahead to cool economic activity and get price pressures under control. Chicago Fed President Charles Evans said raising interest rates somewhat above the neutral level and stopping there should help bring inflation down.

Treasuries pared a rally, the dollar dipped and commodity-linked currencies like Australia’s dollar revived. Demand risks from China’s Covid lockdowns are also impacting markets, keeping oil near $110 a barrel after a fall this week.

The challenge from inflation for bellwether retailers weakens the argument that corporate earnings can help stem this year’s rout in stocks. Instead, global equities are sliding toward a bear market as recession fears mount.

Worst Day
US stocks suffered the biggest daily drop in almost two years as investors assess the impact of higher prices on earnings and prospects for monetary policy tightening on economic growth. Futures signal the slump is set to continue in Japan, Australia and Hong Kong. The selloff sent the S&P 500 down 4%, the most since June 2020, with the plunge in consumer shares surpassing 6%. Treasuries rose across the board, sending the 10- and 30-year Treasury yields down more than 10 basis points.

Testing Times
Kim Jong Un may be preparing to launch an intercontinental ballistic missile or conduct a nuclear test to coincide with President Joe Biden’s trip to the region, as the North Korean leader battles a Covid-19 outbreak that poses one of the greatest crises faced by his regime. Biden will embark Friday on a trip to South Korea and Japan to coordinate with the US allies on security threats, while seeking their participation in a new economic grouping to strengthen supply chains and reduce reliance on China.

FTSE 100 live outlook prediction analysis for 19th May 2022

So, bit of a major sell off yesterday upset the bulls applecart and the S&P waved goodbye to the 4000 level rather easily. The FTSE was a bit more resilient really and has held above the 7350 level so far. The charts have swung back to a fairly bearish picture as you would imagine and to start with we have key resistance at the 7425 area with the daily pivot, the 200ema and just above the 30m coral all here. As such, if we get an early rally/dead cat bounce then a climb to this area looks possible.

The bulls will try and defend a move above 7400 of course though the S&P keeps dragging them back! Above 7430 then the 7495 R1 level is the next to watch though that does feel a big ask currently. 7473 is probably more likely if the bulls really went for it where we have the key fib so keep an eye on this level too.

The 2h chart is now bearish again, with resistance fairly high above the current price at 7520ish from the Hull MA. I dont expect to get that high today either but if it did then the bears will more than likely reappear as we hit this moving average.

The bears meanwhile will be looking to break the overnight low at 7350, and we also have the key fib at 7367 for initial in hours support. Below this 7350 though and the S1 level will be in play at 7311. That also aligns with the daily 200ema at 7314 so I would expect this level to hold, at least initially.

On a separate note I was reading some analysis earlier that Brent crude could drop down to $65 according to some analysts. Less demand and an excess of supply may be the catalyst for that and it would certainly help bring the inflation figures down a bit, as well as help manufacturing. And to think that just 2 years ago it was -$40 and they couldn't give it away!

S&P500
The bears took the win yesterday and the bulls will need to break above the 3973 level initially, to target the 4010 where we have the 30m 200ema and key fib. This level may well see the bears have another crack. Above this then the Hull MA on the bearish 2h chart is at 4030 and dropping steadily so could line up with the coral at 4015 later on. As such, expect resistance in this area. The bulls will be looking to defend the 3900 level today, otherwise a slide to 3850 looks likely.

Dax40
13985 is key resistance to start with, and then 14074 above that where we have the key fib. Support is at 13862 then 13782 below that being the overnight low. S1 is down at 13708 but we may well see a bit of defence from the bulls today, at least initially.

Good luck today, next post will be on Tuesday! Have a good weekend.

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