Article written by IG Senior Market Analyst Axel Rudolph
- FTSE 100 exhibits shorter-term downside potential with the emergence of a 'shooting star' candlestick pattern
- DAX cools after reaching a new all-time high last week even with the ECB hiking another 25 bps
- S&P 500 to start the week in a cautious mood after 'triple witching' on Friday
FTSE 100 on weaker footing
Following last week’s FTSE 100 failure to break through its 7,655 to 7,679 resistance zone on a lasting basis and Friday’s Shooting Star candlestick pattern, the index looks to be short-term under pressure, much like Asian markets overnight which were in a cautious mood.
A slip through the one-month tentative support line at 7,603 could put the 200-day simple moving average (SMA) at 7,549 on the map, together with the early June low at 7,546.
The upper boundary of the near one-month sideways trading range between the mid-May low to late May and current June highs at 7,655 to 7,688 represents key resistance.
Source: IG
DAX 40 begins week on a more cautious note
The DAX 40 made a new all-time record high at 16,428 last week despite the European Central Bank (ECB) hiking its rates for an eight consecutive time to 3.50% and sticking to its hawkish tone.
This week kicks off on a more subdued note with a retracement back towards the one-month uptrend line at 16,169 possibly being witnessed, together with last Thursday’s low at 16,160.
Resistance can be spotted between last Wednesday’s high at 16,338 and this morning’s intraday high at 16,348.
Source: IG
S&P 500 forms minor top
Last week the S&P 500 saw its fifth consecutive week of higher prices with an acceleration to the upside taking it to a 14-month high at 4,447 on hopes that the Federal Reserve’s (Fed) “skip” of not hiking its rates in June might actually turn out to be the long awaited “pivot.”
Following in Asia’s footsteps, this week is likely to begin on a more cautious footing following Friday’s Triple Witching, the day at which stock options, stock index futures and stock index options expire in the US.
According to IG head of markets Europe Salah-Eddine Bouhmidi, since Q1 2000 the week(s) following Triple Witching on average tend to be negative ones.
This time round bulls also have to contend with contrary indicators such as the CNN Fear & Greed Index trading in "extreme greed" territory and the put/call ratio at extremely low levels while the volatility VIX remains at pre-Covid levels, all of which may point to a top forming.
Potential slips may find support around the minor psychological 4,400 mark and at Wednesday’s 4,391 high today, below which the June support line can be spotted at 7,376.
The only resistance of note to speak of is last week’s high at 4,447.
Source: IG
