FTSE 100 Outlook and Analysis for 16th October 2019
Brexit news dominated traders’ attention on a quiet day for company updates, with only Asos making much of a splash on the stock markets. Rather unfortunate for our short order to miss taking at 7222 by 3 points, and then the long order to miss taking by 3 at 7145. At least I’m looking at the right pattern though!
Sterling was whipped back and forth by headlines and tweets during the London session, as whispers emerged from close-to-deadline talks between UK and EU negotiators. It stayed positive from early afternoon onwards despite a slide in the morning after London traders arrived at their desks. The currency re-established four-month highs against the dollar in the lead up to the closing bell, and hit a new five-month high against the euro, continuing a resurgence in strength that began late last week.
The rising currency put pressure on the FTSE 100, with internationally focused firms feeling the heat. Continued friction between the US and China over Hong Kong added to a weak international outlook, leaving the blue-chip index down 0.6pc, or 43.7 points, at 7,167.95 – its biggest fall in more than a week.
The mid-cap FTSE 250 was similarly buffeted by Brexit news, variously sinking and surging through the day. It eventually closed almost flat, down 9.01 points to 20,189.96 – just below the 12-month closing high that it reached on Tuesday.
Markets Mixed
Asian stocks were set for a mixed start Thursday after a weak U.S. consumer report triggered a rally in Treasuries. U.S. equities earlier edged lower. Futures were flat in Japan, contracts rose in Hong Kong and pointed lower in Australia, while the S&P 500 Index slid as energy and technology shares retreated. The dollar and Treasury yields slipped after an unexpected drop in retail sales boosted market pricing for an October rate cut by the Federal Reserve as earnings season ramps up. Elsewhere, the pound strengthened amid signs a Brexit deal may be imminent, and Turkish stocks fell with the lira after the U.S. brought a criminal caseagainst one of the nation’s largest banks. Oil rose 0.3% to $52.97 a barrel, and gold was at $1,490.15 an ounce.
Bordering on Brexit
European leaders are getting ready to gather in Brussels to clinch a deal that will see the U.K. part ways with the European Union. There are signs an agreement can be reached after progress on the stubborn sticking point of the customs border with Ireland. But issues remain, specifically relating to the levying of sales tax. And it’s looking like Brexiteers may tolerate British Prime Minister Boris Johnson’s deal. Democratic Unionist Party Leader Arlene Foster dismissed as “nonsense” a report that her party was close to dropping its opposition to Johnson’s latest proposals. The prime minister will need the DUP’s support if he is to get a deal through Parliament. But is that enough? We’ve done the math to work out whether Johnson is indeed able to get the numbers to pass his deal through Parliament.
FTSE 100 Outlook | Trading Signals | Forecast | Prediction | Analysis
So, what does today have in store for us…. I am looking at the cluster of resistance levels at the 7210 to 7225 area and in light of the fact that the ASX200 had a bearish session then we may well follow the same pattern, and selling the rallies for today may well play out. Of course we have the looming spectre of Brexit deals and cable in the background to change things in an instance. The S&P is dropping off from the 3000, but the bulls are hanging on still. The bears need to break below the 2987 level (2hr support here) for further downside on that. If they do then that should bring the FTSE down towards the 7120 support area.
Initial resistance today is at the 7182 level where we have the 200ema on the 30min, and not far above where we are looking at opening. Its all been fairly calm overnight, with the bulls holding onto the bounce from 7148 yesterday. However the daily and 2 hr charts remain bearish for the moment, and the bulls will need to break above 7240 to gain the upper hand, and 7280 to make it stick.
If the 7221 level holds as resistance then we should see a leg down in a similar pattern to yesterday, with the 7140 still showing as support for the moment. However, if Brexit drives us down we may well get down to the lower support at 7120 today, and this level I am thinking will see a bounce. With S1 and the key fib here I would expect it to hold, as if it doesn’t then the bottom of the 10 day Raff channel comes into play at 7070, and along with S3 at 7064.
Boris Johnson’s hopes of leaving the EU with a Brexit deal appeared to be in the hands of Parliament on Wednesday night after Brussels said an agreement was effectively in place. Donald Tusk, the European Council president, said the “basic foundations of an agreement are ready” and could “theoretically” be agreed with Britain on Thursday.
So another day to stay nimble and keep watching the news flow…
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