Talking Points:
- Equities hold on to recent gains after a positive earnings season. Buyers hold off further momentum until after the FOMC meeting
- Key levels for the FTSE 100, IBEX 35, and CAC 40
European and US equities have been slightly subdued in recent trading despite stronger than expected earnings across the board. Focus in today’s session will be shifted towards the FOMC two-day meeting wrap-up, where investors will be keeping an eye out for any commentary referring to a tapering of bond purchases in the near future, despite no expectations of rate changes until at least 2023.
FTSE 100 Levels
The FTSE 100 continues to ride out the ascending trendline without much momentum going in. Last week’s sharp bearish reversal saw the 6,845 mark confirmed once again as strong support, which is likely to keep buyers in control in the short term. The British index is still keeping close to its mean-reverting levels within the Bollinger Bands, limiting upside momentum in the short term.
As long as price stays above the 76.4% Fibonacci (6,894) then buyers will be able to keep pushing higher, but a sustained break above the 7,000 mark will be needed for the FTSE 100 to attempt a new yearly high above 7,037. A break below 6,805 puts the ascending trendline in jeopardy, at which point there would be a greater risk for a reversal towards the 6,600 mark.
FTSE 100 Daily chart
IBEX 35 Levels
The IBEX 35 has been the outperformer in Europe this week after bouncing off the 61.8% Fibonacci (8,450) following the strong reversal seen last Tuesday. The Spanish stock index has marked a new post-pandemic high after rising above the March 2021 high of 8,741 but buyers are struggling to gain momentum above 8,810 as momentum indicators are showing that the index is slightly overbought at these levels.
Buyers should be aiming to get back above the ascending trendline in the next few weeks to keep prices building higher, which would put emphasis on the 9,000 mark as the next objective. The 76.4% Fibonacci at 9,075 is likely to offer strong resistance for buyers if they are able to pick up momentum.
IBEX 35 Daily Chart
CAC 40 Levels
The CAC 40 has been able to capitalize on bullish momentum in the last few weeks, despite the reversal seen last Tuesday. Other than the DAX, it is one of the only European indices that has managed to fully reverse the losses caused by Covid-19 since March lats year, keeping buyers in control in the long run.
Short-term resistance stands at 6,320 where the stochastic oscillator is holding in the overbought range, so price reversal may arise again before the CAC is able to push higher towards the 6,350 mark.
CAC 40 Daily chart
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--- Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin
