FTSE 100 May Bounce as Traders Book Profits Ahead of U.S. Retail Sales

The FTSE 100 has stabilized after yesterday’s steep decline, but still stands to meet our second target of 6100 over the next 1 to 2 trading sessions. A profit target level for bearish traders beyond 6100 is the October 2 low of 6047.

Yesterday, the FTSE 100 turned bearish as price traded below the support level of 6250 as soft commodities weighed heavy on the FTSE and the S&P 500 turned soft on continued hints about Fed rate hikes.

The FTSE 100 may rise this morning to claw back some of its losses, but also on traders booking profits ahead of the afternoon’s U.S. retail sales report and Uni. of Michigan Consumer Confidence survey. If price reaches the 6200-6250 range, the 38.2 percent to 61.8 percent Fibonacci level of the current bearish leg of 6330 to 6126, we would expect traders to consider fresh short positions as the risk-reward-ratio favours the downside in this range. If the move higher occurs on a better than expected U.S. data report, then traders are probably hesitant to remain bearish. Traders will also hesitate in their being bearish if we get a daily close above 6250. See chart below.

Economist consensus expects the retail sales headline number to rise by 0.3% MoM and retail sales minus the auto stats to rise by 0.4% MoM. The retail sales control group is expected to rise by 0.3% MoM. U. of Michigan Consumer Confidence survey is expected to print 91.5.

Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano

--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com

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