The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.
Yesterday’s FOMC announcement saw something for both bulls and bears, which made for a pretty spectacular trading environment. Ultimately the feeling was that with the rate of interest rate hikes eased significantly, the Fed was more dovish than many had factored in and thus bullish momentum ultimately dominated, pushing the Dow Jones to close 233 points higher by the end of the day.
As markets come down from yesterday’s announcement, we are likely to see some form of consolidation. Yet the feeling is that Janet Yellen and co have provided a platform for further gains across the indices in particular.
FTSE 100 at key resistance
Having ended the day around 110 points higher yesterday, the FTSE 100 looks set for renewed vigor should we see a major resistance point taken out. The 6975 high of 2 March has capped any further upside momentum for now, yet it seems only a matter of time until this hurdle is overcome.
Temporary intraday breaches of 6975 both yesterday and today have been a tentative foray into multiyear highs. However, a solid close above this level will act as my indicator that we are set to see yet another move higher. Yet until that occurs, sideways consolidation appears to be the order of the day.
DAX downside likely to be short-lived
The DAX has resisted the contagious exuberance following yesterday’s news that we could see the Fed raise rates at a slower pace than previously expected. Instead, the one index that has outperformed US and UK markets pulled back for the second day running. However, I believe this downside is highly likely to be short-lived and will likely be seen by many as an opportunity to get in at a better price.
The 50-period SMA on the four-hour chart has provided ongoing and reliable support throughout the last month, capping any move lower and providing a base to move higher. With that indicator having been approached and rejected on a number of times both today and tomorrow, I expect us to see a sharp move higher in the back end of this week, with my bullish bias only questioned should the price close below the 50-period SMA (four hour) which is currently at 11,830. If we see that move higher, the main level of resistance to look out for is the multiyear high of 12,222.
Bullish Dow soars off Yellen effect
The Dow saw massive volatility off yesterday’s announcement from the Fed, and this seems to have drawn a line under the weakness seen for the first two weeks of this month. Given that we saw such a substantial jump higher yesterday, it is to be expected that some profit-taking takes hold and thus the easing off in the value of the Dow is largely normal. However, with a 23.6% Fibonacci retracement, coupled with the swing high on 16 March, the 17,990 level looks to be a near-term support level which could provide enough assistance to push the index higher again.
Given the underlying bullish trend, combined with sentiment from yesterday’s Fed meeting, I do expect to see the Dow push higher again soon, and the dominant support levels I am watching to provide that bounce from are 17,990 and 17,910. Ultimately I believe we will see the peak of 18,284 reached in the very near future.