Technical analysis for FTSE 100 for 21st December 2023
British equities jumped on Wednesday as investors cheered a surprise drop in domestic inflation, which spurred hopes that the Bank of England (BoE) could consider interest rate cuts early next year. The blue-chip FTSE 100 advanced 1.0%, touching its highest level since May 24 earlier in the session, outpacing the pan-European STOXX 600, which closed 0.3% higher.
A sell off after the bell saw the FTSE100 decline to retest the 7645 level though its held that overnight.
The pound dropped 0.5% after official data showed British inflation fell by more than any economist polled by Reuters predicted in November, pushing the headline rate to its lowest since September 2021.
The annual rate of increase in the consumer prices index dropped to 3.9% in November from 4.6% a month ago
Investors moved to price in two quarter-point rate cuts by the BoE for the first half of next year, with the first potentially coming as soon as March.
Stocks fell across Asia, following US declines, as optimism over the prospect of Federal Reserve interest-rate cuts waned and investors trimmed holdings before year-end. The MSCI All Country World Index of shares headed for a second day of loses after it had powered ahead for the previous nine sessions. Both the S&P 500 and Nasdaq 100 stock indexes fell 1.5% on Wednesday. Treasuries traded in a narrow range as did most currencies with volatility easing as the year-end holiday season approaches.
Asian shares retreated on Thursday after Wall Street snapped a long winning streak, while Treasury yields were near five-month lows on hopes Britain's notably soft inflation reading would be echoed in looming U.S. price data. The equities rally, which had been driven by falling interest rates and the Federal Reserve's dovish turn, stalled on Thursday even after U.S. economic data that beat expectations initially turned the major indexes green. A far steeper-than-expected decline in British inflation also took markets by surprise.
FTSE 100 technical analysis for today, 21st December 2023
Bulls got blindsided a bit yesterday with the late sell off, as the S&P500 dropped right off its Hull MA resistance at the 4777 level. For the FTSE100, having managed to reach the 7780 level on the inflation news at 7am, it never retested that, and then continued dropping. It has since tested the Hull MA support at the 7650 area and it's held that overnight so we may well see a little kick up at the open to test the daily pivot and the 30m coral resistance at the 7700 area.
If the bears appear from there then a drop down to test the 7650 level looks likely, and with the key fib and the 30m 200ema here, I would expect a bit of a bounce here. Also a double bottom with the overnight low. Any over shoot would then likely retest that 7625 level that was resistance and is now support. 7620 is also daily support.
This is the last full trading day of the week and prior to Christmas, (tomorrows half day will probably be pretty lacklustre) so the bulls will I think want to try and break above the 7700 level again. Fallen short of the 8000 year end so will have to pencil that in for next year, but ending around the 7700-7800 area is still quite optimistic for 2024.
Below the 7625 level then the 7575 S2 level would be next up but I don't think we will drop that low today.
Resistance wise, 7700 as mentioned, then above that the 7750 level for a test of R1 and also just below the key fib at 7763. Should we see this are this afternoon then we may well see some profit taking there.
On the news front the main thing today will be the US GDP at 1330, expected to have risen to 5.2% to give a boost to the last flourishes of the Santa Rally, and the S&P500 will be keen to retrace some of that fall from yesterday.
The Raff channels all continue to head upwards as well on the FTSE100, Dax40 and S&P500 so the momentum remains up despite that sharp drop yesterday.
I probably won't do much detailed analysis tomorrow morning as its a half day for the markets and usually the price action is a bit rubbish.
Good luck today.
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