What’s inside:
- FTSE 100 drops from resistance zone, but finds support on familiar trend-line
- Looking for a clear break above resistance
- Risk events in the next 24-hrs+ include the FOMC and BoE meetings
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On Monday morning, the FTSE 100 was facing a test of strong resistance in the 6955/17 vicinity, an area it failed from or held as support on numerous occasions since August. After briefly trading above the zone on an intra-day basis the market failed again and closed back below. This is what we had to say the other day should the 100 decline from resistance: “On a dip watch how the recaptured June trend-line is able to hold.” The test and subsequent turnaround during yesterday’s session from the trend-line was solid and what we would expect from a market looking to make an attempt to push higher. On a closing basis, the rally also took the market above the resistance zone (it's an approximate zone, so a little more folllow-through would be more convincing, though).
This morning we are seeing slight weakness thus far, with the market treading near the top of the resistance zone we are keenly focused on. If the FTSE can trade solidly above and hold the noted zone as support, then the next major levels which could quickly come into focus are the record highs (7104 closing/7130 intra-day). Levels along the way worth noting – 6997 and 7067.
The June trend-line is running up into our focus zone and provides a nice confluence to look for the market to lean on with any short-term weakness. The trend-line received a lot of play as support during much of November. A break of the trend-line and Monday low at 6875 would be considered a materially negative event and quickly shift our bias.
Helping the bulls’ case is a healthy appetite for stocks across the board. Major global indices – Nikkei 225, DAX & S&P 500 – are all powering higher as the year quickly comes to a close. Barring a significant turn of events, these markets aren’t likely to see a swift turnaround. If they should, then the FTSE, given it’s been a laggard, may be the first to take a hit. But we’ll cross that bridge should the time come. For now, global tides rising and the technical structure for the FTSE favor seeing higher prices.
FTSE 100: Daily
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Volatility heads up: The Fed will release its decision later today at 19:00 GMT, with the market expecting a 25 bps increase to 0.75%. The Fed will also release its policy statement, economic projections and expected path for rates. While the rate hike, assuming its 25 bps, won’t make a splash, the policy statement and projections could. If there is a big move in U.S. markets this will almost certainly impact opening trade tomorrow. The BoE is also on tap for 12:00 GMT tomorrow, which will of course be another potential source of outsized volatility.
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---Written by Paul Robinson, Market Analyst
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