As long as the FTSE 100 trades above the December 21 low of 5995, the overall trend remains bullish and if traders opt to ignore yesterday’s soft U.S. ISM (48.2 vs. the 49 expected), I would find the FTSE 100 more interesting than the DAX 30 on a stock markets rally.
A reasonably good sign of a low forming coupled with the sentiment turning bullish would be a break to today’s high of 6169. If this happens, I would expect price to reach the December 29 high of 6319 over the next few days.
In the alternative scenario, FTSE 100 traders give up their bullish bias and a break to the December 21 low at 5995 occurs. If this happens, the next support level and target for bearish traders will be the December 14 low of 5858.
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Bullish or Bearish: What Is More Likely?
Given the soft ISM reading yesterday, I would expect bearish traders to dominate, a soft ISM tending to prelude a general slowdown of the U.S. economy. In these circumstances, lower stock markets are warranted and with this in mind, I suspect that the FTSE 100 will remain soft over the coming weeks.
There is no crucial data on tap today, and the next interesting economic release will be the Caixin China PMI Services on January 6, 01:45 GMT. The markets expect a reading of 51.2 (Bloomberg News Survey). A better than expected reading is however most likely needed in order to calm the nerve of stock traders.
--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com
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