Technical analysis for FTSE 100 for 22nd May 2024
The UK's benchmark FTSE 100 was little changed on Tuesday, as gains in pharma giant AstraZeneca were offset by declines in the automobile and parts sector, while investors indulged in some profit-taking ahead of a crucial domestic inflation reading. The blue-chip FTSE 100 lost 0.1%, while the mid-cap FTSE 250 was off 0.4%.
Meanwhile, two Federal Reserve policymakers said it was prudent for the U.S. central bank to wait several more months to ensure that inflation was slowing before commencing interest rate cuts.
Consumer prices index (CPI) data, due on Wednesday, also added to the caution, as investors waited to see if it would support the Bank of England's dovish tone on the timing of interest rate cuts in the year.
Also on the radar will be chipmaker Nvidia's quarterly results, which are expected to influence the broader markets given the euphoria around artificial intelligence.
Minutes of the U.S. Federal Reserve's last meeting due later in the day should confirm the next move is still likely down, but policy makers first need more confidence that inflation has resumed its downtrend. Fed fund futures imply about a 66% chance of a rate cut by September and have 43 basis points of easing priced in for this year.
Figures on UK inflation due later in the session could decide whether the Bank of England eases as early as June, or waits to August.
Forecasts are for core consumer price inflation to slow to 3.6% in April, from 4.2% in March, and anything lower would narrow the odds on a June cut and likely pressure sterling.
Asia & Overnight
Asian shares edged higher on Wednesday as anxious investors dared to hope AI-diva Nvidia could meet sky-high expectations, while also keeping a wary eye on the outlook for U.S. and UK interest rates.
New Zealand's central bank offered a sobering assessment of its inflation problems, warning that rates would have to be higher for longer to bring them to heel in a shock to local markets.
MSCI's broadest index of Asia-Pacific shares outside Japan firmed 0.4%, having already climbed for four straight weeks to reach a two-year top. Chinese blue chips were little changed, just below a seven-month top hit at the start of the week.
Japan's Nikkei eased 0.8% as data showed a weak yen was boosting exports but also stoking imported inflation and weighing on business sentiment.
EUROSTOXX 50 futures and FTSE futures both inched up 0.1%. S&P 500 futures and Nasdaq futures barely budged.
Markets are braced for fireworks when Nvidia reports after the bell, with options priced for a swing of 8.7% in either direction, worth $200 billion in market value. Analysts wonder how much more it can deliver given that the chip-maker already boasts a profit margin of 77%, and its stock is up 93% on the year so far.
Oil prices slipped amid concerns over the peak U.S. driving season, given that demand was seasonally tracking at its lowest since 2020 and retail prices had fallen for four weeks in a row. Brent crude fell 60 cents to $82.28 a barrel, and the spread over futures narrowed further, while U.S. crude lost 63 cents to $78.03 per barrel.
FTSE 100 technical analysis for today, 22nd May 2024
Inflation news just out and the bears capitalised with a drop down through 8400, following the overshoot of the 8420 resistance overnight. With the slight uptick in inflation in theory it does lend more weight to rate cuts, so we may well see a recovery later on.
I have left the order for the long to hop on any rise that may play out, though maybe we were just a bit too early with the short yesterday!
Initial support is from the Hull MA 2h at 8409, but we have just spiked below this which brings the 8384 daily support back into play. Below this and the bulls will be keen to defend the 8360 area once again. That would also set up a decent double bottom level, and it would be worth taking a long here. That said it may not actually get that low and we will see the bulls fight back from this spike down, to try and push for a test of the 8460 level.
If however the bears were to break below the 8360 level (this is also the bottom of the 10d Raff channel) then we may well see a slide towards the 8318 S3 level play out. We have the FOMC minutes out this evening at 7pm, and once again traders will be looking for rate clues. Of more use is the NVIDIA results as well, after the bell. We may well therefore see a buy the rumour sell the news day play out.
Resistance wise, the bulls will initially need to break the 8446 R1 level to get it up towards that 8470, and then above that is the much more significant 8495 - just shy of the 8500 level and the associated positive headlines. Might be a big ask to push that high today though with the inflation news out.
The 2h Dax chart is also bullish to start with and the 18700 level will need to be defended by the bulls to attempt a push up towards the 18840 area. The 2h coral has held as resistance overnight at the 18755 level so they will need to break above this.
Generally the trend is still bullish as you can see from the various Raff channels on the daily charts so that is still the bias for the moment. Keep an eye on the 8360 support level now to start with today.
Good luck.
Interested in how to start trading the FTSE 100? Frequently Asked Questions on Spread betting
Recommended Broker for FTSE 100 trading and how to start trading using support and resistance
IC Markets - offers market leading pricing and trading conditions by providing clients with True ECN Connectivity; this allows you to trade on institutional grade liquidity from the world’s leading investment banks, hedge funds and dark pool liquidity execution venues. Highly recommended!
Membership, Trading Tips, Support and Resistance Levels with Live Trading
If you would like more detailed analysis for FTSE 100, DAX, Gold and S&P, including the trades that I am looking to take myself, then please join my active members community.
What you get
- Daily Analysis pre market open (sent around 7am each day) for FTSE 100, DAX40, Gold and S&P 500.
- Daily email pre market includes my trading plan for the day including ORDER levels, with stops and targets/limits
- Telegram live trading room and group membership for discussion and realtime trade updates
Keep up to date with new content, free sign up below with just your email address
