Quote from Nick on 18th January 2021, 10:34 am

FTSE 100 live outlook prediction analysis for 18th January 2021

London’s benchmark index shed 1pc on Friday, dropping for the fourth time this week to end the five days down almost 2pc as traders booked profit from gains made in a record start to the year. UK markets had their best start to the year ever, but the mood shifted to a more quiet tone this week to leave the FTSE 100 ending down 66.3 points yesterday at 6,735.71.

Sentiment was dented by new data showing Britain’s economy contracted 2.6pc in November due to virus curbing measures, to put the economy back on the road to a recession. This was enough to offset earlier gains on the back of president-elect Joe Biden’s much anticipated $1.9 trillion (£1.4 trillion) stimulus package, which was at the top end of expectations.

Goldman Sees Growth
Goldman Sachs economists raised their growth forecasts for the U.S. this year and beyond after President-elect Joe Biden unveiled a sweeping revival plan calling for $1.9 trillion in spending. In a weekend report to clients, economists predicted the economy would expand 6.6% this year, faster than the 6.4% previously expected. The unemployment rate for the end of 2021 is now seen at 4.5%, down from the prior estimate of 4.8%. The U.S. economy is “spiraling downward”, according to a top economic adviser to Biden, but the incoming administration’s spending plan would generate “the kind of robust recovery we need," he said.[Bloomberg]

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US & Asia Overnight from Bloomberg

U.S. and European equity futures dipped and Asian stocks were mixed Monday amid investor caution at the start of the week even as data indicated China’s economic recovery remains on track. The dollar nudged up.

South Korean shares retreated as sentiment toward chip component makers took a hit on news the Trump administration will restrict licenses to several Huawei Technologies Co. suppliers. Hong Kong and Chinese stocks gained after growth and industrial output data beat expectations. S&P 500 futures pointed lower with European contracts. Crude oil slipped.

Cash Treasuries aren’t trading due to the Martin Luther King Jr. holiday, though U.S. bond futures advanced. The S&P 500 closed lower Friday and support for Treasuries pushed the yield on 10-year notes down to around 1.08%.

Global shares slipped last week after optimism about the $1.9 trillion U.S. aid package, and the so-called reflation trade, faltered into a holiday weekend. Investors are waiting for the inauguration of Joe Biden, who ascends to the U.S. presidency on Wednesday with a speech outlining how he’ll tackle the health and economic crises he inherits.

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

US markets are closed today for Martin Luther King day, and as such we could be on for a fairly flat day on the UK markets. The weakness certainly kicked in last week as the slow decline seems to be playing out after the strong first week start to the year, and the bulls will need to step up again soon if we are to have another move up before some bigger slides for the end of Jan/February.

The S&P needs to defend Fridays low at 3741 otherwise the bottom of the 20 day Raff channel around the 3715 looks to be on the cards shortly. We also have the green daily coral there which would be the first test and therefore should hold, at least initially!

For the FTSE to start with we have a bit of a bearish morning potentially. There are a cluster of resistance levels just above where we are as I write this. The first is the daily pivot at 6728, however we then have the stronger fib level and 200ema at the 6760 area and as such we may well see a drop off from this if we get an initial kick up to start with. The bulls might have a job on their hands to push above this as the 2 hour chart is now bearish again, with 6741 as resistance - so possible overshoot of this to that 6760 then back down. So basically there are a few strong resistance levels nearby to start with!

Above the 6765 level then we have R1 at 6783, and also the 2h coral at 6777. Should the bulls break this then 6860 is R2 but with the US closed then I think this is too much of an ask.

For the bears, they will need to break 6665 today as we have the key fib here and also the cam break out level here. Below this S1 is at 6650, and just above the 25ema on the daily (6640). Bottom of the 20d Raff channel at 6600 and should we see that soon then I would expect some sort of bounce. Coincidentally that level also coincides with S2 for today (at 6596) but I don't think we will see it get that bearish today.

Bull Mondays seem to have deserted the markets in 2021 so far, nor did we get the Friday afternoon pump on the US markets last week. Is that a sign that the bulls are getting weaker for Q1? We are also heading into earnings season for the banks, and after the strong rise in the past 10 months taking some profit off the table would seem prudent.

Good luck today, watch 6755 and 6780 for resistance, 6665 for support.

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