FTSE 100, DAX and S&P 500 stabilise after China cuts rates
News of policy easing in China allowed indices to push higher overnight, leading to hopes of a more positive end to a choppy week.
FTSE 100 edges higher
Yesterday’s price action saw the index rebound from a one-week low and end the session back above the 200-day simple moving average (SMA).
After reversing the gains of the first part of the week, the buyers have stepped in to defend the index, aiming for continued upside that will bring 7570 and then 7600 back into play as upside targets.
Some weakness in the US dollar will help commodity prices, providing a lift to oil stocks, while miners in the index will likely follow the lead of their Australian counterparts and rally in response to the People's Bank of China's (PBoC) decision to cut one of its lending rates overnight in a bid to boost the economy.
A reversal below 7218, yesterday’s low, would see the price once again test the early May lows around 7180, before continued declines that would bring the March lows into view.
DAX claws back some of Wednesday’s losses
Unlike some previous sharp drops over the past month, Wednesday’s slump for the index did not deliver much of a bearish follow-on.
Admittedly the price did hit a one-week low, but it found strength in the latter part of the session and finished around 200 points higher. ￼
Additional gains have come through overnight following news of the PBoC’s rate cut, and now the 50-day SMA at 14,117, and then the highs of the week at 14,260, become potential targets in an upside move.
A fresh bearish view requires a reversal back below 13,600, which would suggest a new attempt to move below the May lows.
S&P 500 stabilises above weekly low
After the bounce was rudely interrupted earlier in the week, the index slumped back to the 3860 low it has tested a week before.
This potential double-bottom could thus set up at least a near-term rebound. Admittedly the last bounce did not end well, fizzling out from the Wednesday high, but if the buyers can engineer a bounce that recovers 4100 perhaps a rally of sorts can be sustained.
Above 4100 the index will move on to 4300, the peak from the immediate post-Federal Reserve bounce. Whether it can keep going from there remains to be seen, given the ongoing pessimism around the global economy.
A fresh move to the downside would require the price to drop below 3960, negating the double bottom discussed above.
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