FTSE 100, DAX 40 and S&P 500 begin week on a positive footing
Outlook on FTSE 100, DAX 40 and S&P 500 following higher-than-expected US CPI data, ahead of further US Q3 earnings.
FTSE 100 remains bid ahead of new UK chancellor statement
The FTSE 100 begins the week on a positive footing, as market players expect the new UK Chancellor of the Exchequer, Jeremy Hunt, to push back on previously announced tax cuts and bring forward tax rises in order to try and calm financial markets and balance the books.
For technical analysts the current recovery comes as no surprise since market sentiment had been extremely bearish over the last few weeks, especially last week, and because short positions were at very elevated levels, increasing the risk of a squeeze being witnessed.
Positive divergence on the daily Relative Strength Index (RSI) could also be made out and still points to higher levels likely being seen this week. Positive divergence occurs when the index makes a new price low compared to a previous low, but the indicator, in this case the RSI, makes a higher low, thus not confirming the price low and more often than not leading to a bullish reversal in price.
The two-month downtrend line at 6,953 is thus in sight, a rise above which would put the early September low and the early October high at 7,104 to 7,131 back in play. En route lie Thursday’s high at 6,978 and the minor psychological 7,000 mark.
Slips should find minor support at Friday’s 6,826 low and further support at the early October low at 6,783.
DAX 40 remains bid ahead of German ZEW data out Tuesday
The DAX 40’s initial reaction to the higher-than-expected US Consumer Price Inflation (CPI) data Last week, like that of its European and US peers, was to drop before short covering amid extremely negative market sentiment propelled it to last week’s high at 12,680, only for disappointing US third quarter (Q3) earnings to push it back down again.
So far, the index remains bid above its breached two-month downtrend line at 12,346, though, with last week’s high at 12,680 in sight ahead of Tuesday’s German ZEW economic sentiment data release.
A rise above 12,680 would engage the 12,704 early October high, a daily chart close above it would mean that at least a medium-term bottom is in the process of being formed, targeting the early September and 20 September highs at 12,940 to 13,057.
S&P 500 hovers above its recent lows as US earnings season continues
The S&P 500 dropped last week amid concerns about tighter monetary policy, weaker earnings and rising inflation, and the accompanying fears of a global recession.
It did manage to close the week off around the 200-week simple moving average (SMA) at 3,605, above which it is expected to open this week ahead of Monday’s BNY Mellon and Bank of America Q3 earnings.
From a technical perspective last week’s bullish reversal on the daily candlestick chart has further to run with last week’s high and the late September high at 3,721 to 3,737 representing the first upside target zone, followed by the 3,807 early October peak.
Good support can now be found between the 27 September to early October lows at 3,611 to 3,576.
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