FTSE 100 outlook and analysis for 6th November 2019
- US markets flat as Europe makes meagre gains on trade deal hopes
- FTSE 100 advances as pound slips beneath $1.29
- US non-manufacturing activity gauge points to growth
- UK services sector delivers “a lifeless set of results” as growth reading comes in flat
- Service difficulties “are largely of Brexit’s making”
The economy is stuck in its worst slump for more than a decade as the services industry remained hamstrung by the Brexit stalemate during a “lifeless” October. Services failed to receive a Brexit deal bounce as job losses continued to pile up and new work declined for a third straight month in the all-sector purchasing managers’ index (PMI) for October.
The services industry, the largest part of the economy, flatlined at a score of 50 last month, a small recovery from September, with any reading below that score indicating a drop in output.
The all-sector PMI rose marginally to 49.5 from 48.8, held in contraction territory by the construction sector’s woes. The struggling industry suffered the biggest job losses, but the overall plunge in employment across the economy was less severe than September’s near 10-year high. The closely watched survey signalled a contraction for a third consecutive month, indicating that the economy is in its longest downturn for more than 10 years.
Asia
Stocks in Asia mostly slipped as investors looked for fresh reasons to be bullish about trade negotiations. Investors are now waiting to see if U.S. President Donald Trump will do as China asks and eliminate some of the tariffs he’s imposed, in order to hurry along a deal. One sign that investors have been betting in recent days on a positive trade outcome is that lower-volatility shares from sectors less exposed to economic cycles have started to underperform after beating the market for much of the year. Strategists at HSBC Holdings Plc say it’s time to sell risk assets as sentiment looks stretched.
Factory Fears
German factory orders are becoming one of the euro area’s biggest monthly data points, with the last two readings helping to fuel fears of a recession in the currency bloc’s largest economy. Manufacturing in the zone on a whole is the weakest it’s been for seven years, adding to pressure on the region’s governments to provide more fiscal stimulus, and anything other than a return to small growth for the factory number at 8 a.m. CET, as forecast by the average economist, could hit the euro today.
Looking ahead today’s news highlights include EZ Services & Comp PMI and Retail Sales, US Labour Costs, Productivity and DoEs, Canadian Ivey PMI, ECB’s de Guindos, Mersch and Holzmann, Fed’s Evans, Williams and Harker, supply from the US.
FTSE 100 Outlook | Trading Signals | Forecast | Prediction | Analysis
The ASX200 had a pretty bearish session, and the S&P has dropped back from its 3085 level as we pull back from the extreme greed/overbought levels. The fear/greed is on extreme greed 89/100 so pays to be a bit cautious still. That said we still have the 7440 gap level on the FTSE which if we see looks to be a decent shorting level.
For today however we have initial resistance at the 7382/7388 area with the daily pivot and the 30min coral at this area. As such, if we retrace a bit of the fall to hit that area (and its also yesterdays closing price at 7388) then we may well then see a drop down from here. Should the bulls break above 7388 though then 7428 is the next level of note where we have a key fib based on yesterdays levels. Above this, 7440 as mentioned, then the top of the Raff channels are still around the 7480 area – though I am not convinced that we will get that high today.
So, assuming we get the drop down, then the main area of support is the 7346 200ema on the 30min, S2 at 7340 and also a key fib at 7332. We also have the 2 hour coral now green at 7342. So a decent cluster of supports around here. Should the bears break below the 7332 though, then I am looking at a drop down onto the daily supports at 7270, and then the daily coral at 7220.
That said, the daily Raff channels are still heading upwards so the bulls might still have a bit left in the tank. It’s certainly shaking off anything negative at the moment, and a test of the 7440 level cannot be ruled out. Markets can remain overbought/oversold for a while. In theory above the 7350 level is technically bullish, so we may well see an initial hold of that level this morning, depending on the momentum for any downside this morning.
Let’s see if we get a bit more movement on the FTSE today. Watching the 7388 and 7440 resistance levels, 7332 and 7280 as support. Good luck today.
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