Markets declined yesterday after Federal Reserve officials followed through on an expected interest rate increase and raised their forecast for economic growth in 2018, even as they stuck with a projection for three hikes in the coming year. The S&P dropped off from the 2670 level, while out Dax short worked a treat from 13120.
The FTSE failed to reach the 7499 resistance before declining, though didn't sell off as sharply, with the 7450 support level holding. The US tax reforms are still not a done deal which was weighing on the US markets as well, with Draghi unveiled updated economic projections that showed continued growth over the next three years.
Today is option expiry so it's going to be spikey. At 10:10 this morning till 10:20 as the various futures contracts roll over/expire. However, for today I am looking to buy the dip for a run up to 7485 and possibly higher. We have been expecting the pullback from the 7500 level on Wednesday and Thursday and got it yesterday, and are now nearing a few key support levels between 7410 and 7430. As such a long around this level for a push higher over the course of today makes sense. If that plays out then it bodes well for further upside next week in the last hiatus before the holidays.
If the 7410 level breaks though then things look a little bit more ropey with 7300 still hovering around as a downside target for the bears. But would they pile in big time so close to Christmas, with the "Santa Rally" a possibility still next week? Probably not. As such, a rise from the supports looks a better play for today.
It's Friday so a bit of caution needed, along with option expiry, so fade the longs in or do smaller stakes. The US was pretty risk-off yesterday which gives a clue that probably its best not to be all in on longs this morning, but if we do start to bounce can always add to the winners.
All in all, a fairly simple plan today, bullish above 7410, buy any initial dip and lets see if the bulls can break 7485.