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FTSE 100 Remains Bullish Above 6209 Despite This Morning’s Panic

FTSE 100 Remains Bullish Above 6209 Despite This Morning’s Panic

Alejandro Zambrano, Market Analyst

Talking Points

  • FTSE 100 holds trend despite this morning’s panic and is bullish above 6209
  • I would expect the political implications of the downing of the jet to be small
  • Better growth ahead suggested by the German IFO Index
  • U.S. house data and consumer confidence on tap

The downing of a Russian warplane jet triggered a slide in the FTSE 100, but the index has recuperated some of its losses and is expected to trade higher as long as the November 17 low of 6209 holds as a support. The risk-reward ratio favors bullish positions at current levels and the FTSE may reach last week’s high of 6369 over the next few days. For now I would expect the political implications of the downing of the jet to be small as Russia and Europe/USA work together towards defeating IS.

However, if the FTSE 100 breaks the low of 6209, the FTSE may reach 6173 which is a 61.8% correction to the rally from 6050 to 6369. I don’t expect traders to short on the break and rather book losses on long positions. Currently the bar of short-selling in the market is high as the focus remains on the ECB, seasonality patterns, and growth which is expected to pick up over the coming months.

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Better Growth Ahead

An example of higher growth ahead is yesterday’s Eurozone Mfg. PMI and Services PMI prints. They increased from prior months and beat economists’ expectations by printing 52.8 from 52.3 and 54.6 from 54.1 respectively. Also positive was last week’s German ZEW expectations index which increased from low levels and today’s German IFO index which printed 109 vs. a Bloomberg News survey expecting an outcome of 108.2.

Softer data was U.S. Markit Mfg. PMI which declined to 52.6 from 54.1 and reached a two year low. On the other hand, the U.S. Markit Mfg. PMI was high in relation to the ISM Mfg. PMI, hence the decline is probably due to these indicators aligning with each other. Markit reports that the export orders sub index turned negative on a strong Dollar and global slowdown, while manufacturing payroll numbers were reported to have increased again in November.

German 3Q GDP Confirms Moderate Growth, Domestic Demand Key

Commodities To Keep on Limiting the FTSE 100

The biggest drag on the FTSE 100 remains commodities and yesterday the Bloomberg commodity index reached new lows. This trend is expected to continue as whilst supply for most commodities is exceeding demand, suppliers are willing to fight for market share by offering discounts, alongside the USD remaining strong.

Market moving data on tap in today’s session are U.S. house price data and U.S. consumer confidence. I don’t expect the outcome of these indicators to rock the markets or overall trends unless their outcomes are heavily skewed bullish or bearish.

FTSE 100 Remains Bullish Above 6209 Despite This Morning’s Panic

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

Contact and follow Alejandro on Twitter: @AlexFX00

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