FTSE 100 Trades Lower On Soft Commodities

2015-11-23 10:54:00

Alejandro Zambrano, Market Analyst

Talking points

Soft Crude Oil and Copper weigh heavily on the FTSE 100, but the trend is bullish above Tuesday’s low of 6224
U.S. PMI may help to boost sentiment

With the DAX 30 taking a breather after last week’s strong rally and commodity prices like copper and crude oil trading lower in the overnight session, the FTSE 100 is back under pressure. The Energy Sector is the biggest drag on the index and is down by 1.12% in today’s session, followed by Telecommunications (-0.75%).

The short-term trend remains bullish above last Tuesday’s low of 6224 and the FTSE 100 has now corrected 61.8% of the rally from the 6224 low to last week’s high of 6369. This is a reasonable pullback and some traders are probably going long at current levels as the risk-reward ratio is good. However, I would keep an eye on the DAX 30 if it decides to trader lower given that the FTSE 100 will probably trade lower and may sit very close to the 6224 mark before we’re aware of it.

A break to 6224 will turn the short-term trend bearish, however, last week’s rally shows that traders are far more interested in buying rather than selling, hence, traders will probably still look to buy near 6224.

In the afternoon U.S. PMI data is on tap. Higher readings than last month would indicate growth if firming and is stock market bullish. However, in the short-term the readings must beat expectations for stock markets to rally. I don’t think however that the readings will matter too much unless they are substantially lower or stronger than expected, as the Fed and ECB are now on autopilot ahead of their rate meetings next month.

Upcoming Risk Events, GMT

13:30, U.S. Chicago Fed Nat Activity Index (OCT), est. 0.08

14:45, U.S. Markit US Manufacturing PMI (NOV P), est. 54

15:00, U.S. Existing Home Sales (MoM) (OCT), -2.7%