FTSE 100 & UK Market Direction Discussion

[City Index]

Global sentiment has received a boost over the last few days on hopes of US inflation continuing to peak, combined with Ukraine’s recent successes against Russia. As a result, the FTSE100 is currently extending its recent rally, despite underwhelming economic data released from the UK data so far this week.

Over the past few months, the FTSE has managed to find support around the key psychological level of 7000, while forming highs between 7580-7640. The market could now find itself locked in choppy, sideways action within these key levels as investor sentiment continues fluctuating as a variety of major economic stories, including monetary policy and recession fears, continue to develop.

All trading carries risk, and with US CPI data in a few hours, it will be interesting to see how it impacts the FTSE and the overall mood in the market.

 

[City Index]

Growing pressure on the BOE to ramp up their rate hike cycle, or even take emergency action in response to the government’s new mini-budget could weigh heavily on UK stocks this week.

The FTSE100 is currently testing a break of the key 7000 level highlighted earlier, and when combined with the already gloomy economic outlook and global risk-off sentiment, the index may be exposed to retesting support around 6800.

Of course, all trading carries risk, and the FTSE did manage to pare losses below 7000 on Friday. It will be interesting to see if it can bounce again or finally close lower.

 

[City Index]

The FTSE100 found support near the 2022 lows yesterday with the index reversing early losses after retesting the key 6800 level

Bulls are likely to continue defending this long-term resistance-turned-support, and with a number of major stock indices around the world trading at or around YTD lows after the recent losses, there could now be scope for rebound or relief rally as selling pressure looks to have reached an extreme.

However, given the bearish fundamental backdrop that persists, upside may be limited. The 6800 region has provided support a number of times over the past 18-months, so it is important to note that a break below could expose the FTSE to the possibility of losses accelerating.

All trading carries risk, but it will be interesting to see the market can build on yesterday's bounce and attempt to start a new leg higher.

 

[City Index]

Interest rate decisions, a new Prime Minister, major Q3 earnings, and any further developments out of China will all probably play a big role in market direction this week.

The FTSE100 has already seen a relatively volatile start to the week, swinging between gains and losses yesterday before ultimately managing a close above the major psychological support-turned-resistance at 7000. However, it could be worth noting that Monday’s move did stall just below its weekly R1.

The index could still break higher if this week’s earnings reports, especially Big Tech in the US, can surprise to the upside, and the appointment of Rishi Sunak also helps instil a sense of confidence in the UK government. This would then open the possibility to retest its recent highs just above 7100.

Of course, all trading carries risk, but it will be interesting to see how investor sentiment shapes up over the coming days, and whether the index can hold this break of 7000.

 

[City Index]

Focus today will be on the Autumn Budget, which could see a combination of higher taxes and spending cuts weigh further on economic sentiment in the UK.

The FTSE100 had managed to break above its 200-day MA last week, as risk assets rallied on the soft US CPI print. However, the index has since seemingly run into a wall of selling just above 7400. This also coincides with the FTSE’s monthly R2, and the inability to break higher may be an indication of a swing high forming around this key technical level.

Of course, all trading involves risk, and while the statement could act as a catalyst for a new leg lower from here, stocks may attempt to push higher if the budget isn’t as bad as feared.

Either way, the door is open for some additional volatility this afternoon, so it will worth watching how the market react.