Quote from Nick on 2nd March 2020, 10:14 am

FTSE 100 live outlook prediction analysis for 2nd March 2020

What a week that was, but was good to get the long off 6455 and catch hat rise on Friday. There was a big gap down Sunday night but the FTSE futures have climbed again and we are at that 6675 resistance level to start with today. Slightly tentative but the 2 hour chart has gone bullish now with support at 6580 showing - will it hold if tested today? Expect volatility to continue either way.

US Federal Reserve chairman Jerome Powell vowed to shore up the US economy if necessary after a week-long market rout in which $6 trillion (£5 trillion) was wiped off global shares amid a panic over the coronavirus. Mr Powell hinted at emergency measures such as a possible rate cut to stimulate American growth in an intervention which could spark other central bankers to follow suit. It came after equity markets extended their falls on Friday, as a furious sell-off continued on worries that the outbreak will badly disrupt the global economy.

In London, the FTSE 100 ended down 3.2pc at its lowest level since just after the Brexit referendum, rounding out an 11.1pc fall over its worst week since the financial crisis. The pan-European Stoxx 600 – which closed at a record high little more than a week ago – dropped 12.3pc over five sessions, while crude oil tumbled further, briefly falling below $50 a barrel. Wall Street pared losses after the Mr Powell’s comments, with the benchmark Dow Jones index closing down 1.4pc, but still suffering its worst week since 2008.

Mr Powell said: “The fundamentals of the US economy remain strong. However, the coronavirus poses evolving risks to economic activity.
“We will use our tools and act as appropriate to support the economy.”

'Fear Factor' Running High

Traders around the globe bracing for another rough week got an early taste of quite how brutal it’s going to be again in markets after risk currencies plummeted in early trading. Any solace from the Federal Reserve saying it would act by cutting rates if the economic effects of the coronavirus warranted it could be fleeting. The offshore yuan sank and the Australian dollar plumbed fresh 11-year lows as investors ramped up bets for more monetary stimulus. The yen climbed and bonds yields in Australia and New Zealand sunk to fresh all-time lows as the recent clamor for haven assets showed no signs of letting up. Focus will be on the yuan, which retreated after data over the weekend showed activity contracted sharply last month. Asia equity futures are pointing lower. U.S. stocks pointed their worst week since the financial crisis on Friday. Treasuries surged, pushing yields on the 10- and 30-year notes to record lows. The number of cases in Italy jumped by more than 50%, while the U.S., Australia and Thailand reported their first fatalities. Read the latest updates on the virus here.

Ready to Cut

The Federal Reserve is now prepared to reduce interest rates this month even though it recognizes monetary policy cannot completely shelter a U.S. economy increasingly threatened by the coronavirus. Fed Chairman Jerome Powell opened the door to a rate-cut at the Fed’s March 17-18 meeting by issuing a rare statement Friday pledging to “act as appropriate” to support the economy. Traders and a string of Wall Street banks now expect the Fed to lower rates in the coming months, with some seeing the possibility of an emergency cut before the central bank’s March meeting.

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

Asian stocks and U.S. equity futures climbed for the first time in eight days Monday, reversing early declines in wild trading amid signs of support from central banks. Bond yields pared losses and the yen retreated.

I would expect the volatility to continue this week but we may well start to see some more rhetoric and probably action from central banks this week. If markets stabilise then so might the panic, but the media love a good scare story so are also stoking the fear bubble. Cases of Coronavirus will continue to rise I expect, along with the death rate but we are not seeing thousands dropping like flies at the moment. Either way, it's going to be an interesting week.

For today I am looking at the main support areas at the 6582 level which is now the moving average support on the 2 hour chart after a bullish cross, with the 30min coral below that at 6552. Should the bears break below this level then a retest of Fridays low at 6450 is probably going to happen, though there is then decent looking daily support below that at 6420. If this were to be tested then I am thinking it may well hold and as such is a decent long area for another bounce. If it breaks then we remain on a path down towards the 6200 or lower levels.

For the bulls, the futures prices have recovered well after the initial gap down, and they will be keen to build on Friday's rise..... Probably helped by some stimulus measures. Initial resistance is at the 6765 level where we have the red coral line on the 2 hour chart, with decent daily resistance and also the 200ema on the 30min above that at 6830 to 6850 area. As such should we get a rise to this area a short here looks to be worth taking. Above 6850 then 6925 is the next level of note with 6960 above that where we have the top of the 10 day Raff channel - if it got there then probably also worth a short. I think a 400 point rally from Fridays close will need central bank stimulus measures to drive it there today/tomorrow though.

So there are a few levels in play, fairly spread out, but I am expecting another volatile day. It was good to see 6450 hold on Friday and we have built on that rise well, so we may well start to see some more brave bulls buy in, especially if things stabilise a bit.

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