European Open: FTSE Tests Neckline of Bullish Reversal Pattern

The FTSE has posted solid gains over the past three sessions, with yesterday’s close probing the neckline of a bullish reversal pattern.

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Asian Indices:

  • Australia's ASX 200 index fell by -26.2 points (-0.36%) and currently trades at 7,273.60
  • Japan's Nikkei 225 index has fallen by -248.39 points (-0.87%) and currently trades at 28,249.81
  • Hong Kong's Hang Seng index has fallen by -285.95 points (-1.13%) and currently trades at 25,039.14

 

UK and Europe:

  • UK's FTSE 100 futures are currently down -46 points (-0.65%), the cash market is currently estimated to open at 7,100.85
  • Euro STOXX 50 futures are currently down -37.5 points (-0.92%), the cash market is currently estimated to open at 4,035.02
  • Germany's DAX futures are currently down -113 points (-0.74%), the cash market is currently estimated to open at 15,086.14

 

US Futures:

  • DJI futures are currently down -250.19 points (-0.72%)
  • S&P 500 futures are currently down -74 points (-0.5%)
  • Nasdaq 100 futures are currently down -20.25 points (-0.47%)

 

Indices

Asian equity markets traded lower overnight as they tracked Wall Street’s lead, as concerns over a Fed hike continued to weigh on sentiment. Evergrande missed another bond payment to send the Hang Seng Enterprise Index over 1% lower. Shares for Evergrande (3333) ceased trading on 5th October and had fallen over 90% since their July 2020 high.

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The FTSE 100 is considering a break higher. As it’s correction from the 7224 high came in 3-waves, it is possible the correction was completed in September at 6828. And as that low was part of a failed attempt to break beneath the 200-day eMA before a strong 2-day rally, and we’ve since seen a higher low, we suspect the FTSE is now in the early stages of a bullish impulsive move higher. Furthermore, an inverted head and shoulders pattern appears to be shaping up for a breakout, which projects an upside target around 7500.

Yesterday closed on the neckline but we would consider a high-volume break of the 7159.61 high that the H&S pattern is confirmed, and our bias remains bullish above 7070.

However, take note that futures markets are pointing for a weak open today, so if sentiment remains bearish overall it may not be quite ready to break higher immediately. In which case 707 is an important level for bulls to defend today.

 

 

FTSE 350: Market Internals

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FTSE 350: 4085.11 (0.72%) 11 October 2021

  • 148 (42.17%) stocks advanced and 178 (50.71%) declined
  • 12 stocks rose to a new 52-week high, 10 fell to new lows
  • 51% of stocks closed above their 200-day average
  • 98.29% of stocks closed above their 50-day average
  • 13.11% of stocks closed above their 20-day average

 

Outperformers:

  • + 7.65%-Endeavour Mining PLC(EDV.L)
  • + 5.36%-Ferrexpo PLC(FXPO.L)
  • + 5.20%-Anglo American PLC(AAL.L)

 

Underperformers:

  • -6.50%-Trainline PLC(TRNT.L)
  • -5.29% -Drax Group PLC(DRX.L)
  • -5.29%-Tui AG(TUIT.L)

 

 

Forex: Yen pairs possible a little stretched over the near-term

Ranges were very low across currency pairs overnight. As we saw extended move across yen pairs yesterday then it’s possible they have gone too far too fast. However, should yields continue to rise then its plausible we may see the yen weaken further, yet one should question the reward to risk potential around current levels after several days of markets moving in the same direction.

Still, GBP/JPY appears to have broken out of its multi-month retracement, after holding above its 200-day eMA and breaking trend resistance. From here we remain bullish above the breakout level of 152.85 but would prefer to see a pullback before it continues higher.

UK employment data is released at 07:00 BST, where the unemployment rate is expected to fall to 4.5% from 4.6%, claimant count is expected to fall -60.5k whilst 243k jobs are forecast to have been added.

 

 

Commodities:

WTI found support at $80 during a tightly traded overnight session. Tae note that it have back around 2/3rd of yesterday’s initial gains to form a bearish hammer below the monthly R2 pivot point, so the move is showing early signs that it may be losing steam. Should prices begin to correct when we’d look for a new low to form around or above the September high (76.90).

 

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