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The global stock markets have been having a tough time of it lately, with rising bond yields, the threat of a global trade war, and rising rates driving a shift out of stocks. However, we are seeing tentative signs that this period of weakness could be over, and with traders keen to jump back into stocks, the recovery could be swift once we see a bullish break.
Key to this will be progression on the US-China trade issue, and with the tone softening between both sides, it is becoming clear that we are more likely to see a positive resolution than a breakdown in trade ties. However, the glimmer of light seen on the US-China trade issue has now been accompanied by a promise from Donald Trump to launch missiles into Syria, in turn heightening tensions between the US and Russia. This highlights the volatility and fragility of any market recovery in the near term. However, looking at markets, there is a clear outperformance amongst European indices, with the DAX and FTSE 100 coming close to a bullish breakout this week. With that in mind, are we seeing a bottom for European equity markets?
The FTSE 100 has managed to break through a crucial resistance level this week, with the price hitting the highest level since February, after breaking above 7256. That could be a very telling move, with the break through the wider 76.4% retracement (7223) pointing towards a likely continuation of this rally towards the 7340 mark.
That resistance level will provide the crucial bullish signal if broken, yet we may not be there quite yet. By shifting the line from the February and March lows, it is clear that the highs seen this week have currently found difficulty breaking through that point (currently 7260). This adds another notable point of resistance up ahead, highlighting that for a wider bullish theme to come back into play, it would make sense to await a break through 7260 and 7340.