The FTSE 100 soared on Monday as the post-election ‘Boris bounce’ entered a second session, managing to climb to the 7540 resistance level we had pencilled in. The bulls tried to break higher, but stalled at 7553 before dropping off a bit, as the S&P also made a record high again, just below the 3200 level.
PMI data from the US shows a continued recovery after a slowdown in activity growth earlier this year. Manufacturing scored 52.5 (against expectations of 52.6), and services scored 52.2 (against expectations of 52), where a reading above 50 indicates growth.
FTSE 100 Outlook and Prediction
That was a great rise yesterday into the resistance zone at the 7540 level and I am thinking that we may well see a bit of profit taking today and a bit of a dip off this area. We had the continuation of the relief rally yesterday, however focus will now return to Brexit, trade wars and so on, so we may well see a dip down to the daily support at the 7330 level (but rising steadily) before the year end push gets going. The charts are all bullish for the moment, however, with the rises it has meant that global stocks are overbought currently - so a dip and rise pattern would play out pretty well. However, I am sure that it will test us, so remain nimble. If the bulls can push past the 7555 level (yesterdays high) then a rise towards 7650 and the top of the 10 day Raff is likely.
Initial resistance this morning is coming from the fib level, and also the top of the 20 day Raff channel at this 7550 level. I would also quite like to see a dip on the S&P to close the gap from Fridays close at the 3172 level, and with the 2 hour coral here as well it would then set up well for another push higher. That may well pull the FTSE down to test the daily supports. Cable has continued its slide from 135 which as helped the FTSE to rise. If that finds support at the 132 level then we may see the FTSE 100 drop.
I still have half the Dax short from 13425 running for the moment, with the stop at breakeven so will just see how that plays out now, and trail the stop if it were to drop further towards the 2hr coral at 13296.
Support wise, we have the daily pivot first up at 7482 and then the 2 hour moving average at 7461. However, if the bears do get some momentum then we may well see the fib level at 7436 get tested, and possibly S1 at 7412 - though that seems a bit too bearish for today! That said, you never know. We may well see the Boris bounce speculators banking some profit and locking in the year end bonus results.
Generally still thinking that buying the dips is the play for the moment, and we may well get a decent dip today. If we do drop down to test the daily support levels now at 7330, then this is decent swing long territory for the year end bounce. The US will certainly be keen to close the year out strongly and lock in a 25% gain for the year.