Overnight spike down to 6773 | Bulls need to break 6909 | 6600 looming? | Trading analysis

Overnight spike down to 6773 | Bulls need to break 6909 | 6600 looming? | Trading analysis

6th December 2018

That was a decent hold of 6932 yesterday morning after the initial dip from 6970 to then get the slow rise towards 6960 over the course of the day. With the US closed for a day of mourning, the markets were pretty flat overall during the day. All changed overnight with a large spike down overnight, with the FTSE 100 futures dropping to 6772. Its being pinned on the arrest of the Huawai CFO, but also serves the purpose of a large stop hunt to all those holding longs in anticipation of a Santa Rally. Funny how it works sometimes. The arrest was set to escalate the US/China trade tensions. Apparently. It’s usually more to do with (a) the optics and (b) gaining leverage, rather than the official line of dealing with Iran….

Wednesday Overview

The fall of longer-dated US government bond yields on Tuesday rattled investor confidence into Wednesday and sparked fear of a recession, sending shares in Asia and Europe sliding initially. The FTSE closed 1.44pc, or 100.92 points, lower at 6,921.84 while the FTSE 250 was 0.26pc, or 46.77 points, behind at 18,282.87.

In the eurozone the Paris CAC ended 1.36pc down, finishing 68.29 points lower at 4,944.37. The Frankfurt DAX dropped 1.19pc, or 135.08 points, to 11,200.24.

The pound remained up against the dollar and the euro as Philip Hammond said that Brexit is was price worth paying to ensure those who voted to leave did not feel betrayed. It was up 0.25pc against the dollar a $1.2749 and 0.18pc up against the euro at €1.1235.

Oil was also up 1.53pc at $62.23 per barrel ahead of the OPEC meeting tomorrow. Traders are expecting a production cut to be announced.

Trump

Trump said China is sending “very strong signals” following weekend trade discussions in Argentina, as uncertainty remains over what commitments were made between the two nations. “Not to sound naive or anything, but I believe President Xi meant every word of what he said at our long and hopefully historic meeting,” Trump said on Twitter Wednesday. “ALL subjects discussed!” Beijing will start to quickly implement specific items where there’s consensus with the U.S. and will push forward on trade negotiations within the 90-day “timetable and road map,” the Ministry of Commerce said in a statement on Wednesday morning in China. Hours later, Bloomberg News reported that officials have begun preparing to restart imports of U.S. soybeans and liquefied natural gas.

Brexit

Theresa May is searching for a compromise to avoid a crushing defeat on her Brexit deal in a key vote in Parliament next week. Late Wednesday the premier sent Chief Whip Julian Smith to negotiate a way forward with the pro-Brexit European Research Group of Conservative lawmakers that would allow them to support the package she painstakingly negotiated with the EU over 17 months. She’s been holding what officials described as productive meetings in her office with Tory rebels, and will hold more Thursday. The idea she’s said to have hit on is a so-called Parliamentary “lock” that would mean lawmakers would need to give their consent before the most contentious part of the exit deal comes into force. It’s effectively a veto for the House of Commons which could vote to stop the U.K. entering the Irish border backstop arrangement, a part of the deal loathed by pro-Brexit Tories because it binds Britain to EU rules they want to escape.


FTSE 100 Trading Signals, Forecast and Prediction

Being a bit more cautious today to let the dust settle on that overnight move down, but looking at the 6840 support area holding initially for a rise towards the fib level at 6909 and also the gap from yesterday close at 6920. It was quite a move down overnight, but the S3 level (based on in hours data) at 6779 held and we saw a swift move back up. Time will tell if that was just a massive stop hunt or not.

If the 6920 level does get tested, and I was also looking this week at 6912 being support, though that has broken now, so that area becomes resistance, we may well see a drop back from there down towards the 6840 level, though we also have the daily pivot for support at 6866. If the US sells off when they resume trading after being closed yesterday then a revisit down towards 6800 where w have the key fib is possible. 6600 is still also on the radar and has been for a while and with the negative backdrop still looks distinctly possible. I expect the US to rise as they will want that arrest to give them the upper hand in trade negotiations – will be a bit odd to carry that out and mess up their stock market. Conspiracy mode off.

Retest of 6772 possibly

For today I am expecting an initial rise though – it’s what happens at 6920 that will set the tone for the rest of the day – above that then the bulls will be aiming for 7000 but we now also have the red coral on the 2 hour at 7018 to hurdle. If we then see a drop off that 6920 and the US continues the decline we could remain pretty bearish and a retest of 6772, and possible the trip down towards 6600 is underway.

So cautious overall, bullish bias to start with and 6840 support area, to target 6920 and from there, expect a drop but could also pop higher. Sorry thats a bit vague! Good luck today.

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