Last week, the FTSE 100 finally ended its range trading by breaking its 6250 to 6487 range. The FTSE quickly lost ground and reached our second profit target of 6105.
The overall trend should remain bearish below 6200 and traders will most likely aim for the October 1 lows of 6037 and then the psychological level of 6000.
FTSE 100 Catches Up With Commodities Slide
Weighing on the FTSE 100 was the Basic Materials Sector with the median share price declining by 6.78 percent over last week, followed by the Oil & Gas sector with a median share price decline of 6.06 percent. Financial shares were the third worst performing sector and the median share fell by 3.98 percent.
The softness of the Basic Materials and Oil & Gas Sectors follows our narrative over the last few weeks, which has stated that the soft commodity markets are weighing heavy on the FTSE index.
Our latest linear regression estimation using the last 6 months of data suggests that if the FTSE 100 was solely driven by the Bloomberg Commodity index, the FTSE 100 should be trading closer to 6067. A level we reached this morning, hence the FTSE 100 is now in line with the commodity market softness.
Next Bearish Push Should Be Triggered By a Soft DAX
The next bearish push should be on the back of the DAX 30 turning softer; click here to read our outlook. With the DAX 30 breaking its trend defining level of 10,685 on Friday, I expect a decline by roughly 200 points as long as the index remains below Friday’s high of 10,815; I expect this to shave off an additional 82 points from the FTSE 100, leaving it near 6000.
U.S. Empire Mfg. Index On Tap
The only relevant economic data on tap today is the U.S. Empire manufacturing index for November. A Bloomberg news survey projects an outcome of -5, which would be a clear improvement from -14.97 in August. However, I don’t expect the markets to quickly be able to shrug off fears that there will be that first Fed rate hike, as well as Friday’s soft U.S retail sales and the risk-aversion following the attacks on Paris.
Technical Outlook
The overall trend should remain bearish below 6200 and traders will most likely aim for the October 1 lows of 6037 and the psychological level of 6000.
Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano
--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com
Contact and follow Alejandro on Twitter: @AlexFX00
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