Vulnerable Below 6,800 Despite Ascending Channel

Key Talking Points:

• Global equities are pushing higher this morning ahead of Yellen’s address to US policymakers
• The UK sees a small reduction in new infection and death rates and could see lockdown measures eased in April
• FTSE 100 fails to take full advantage of bullish sentiment and remains trapped under the 6,800 mark

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There seems to be a risk–on move this morning in global markets after a strong finish to yesterday’s session on the back of a US holiday has led to gains in Asia.

But after an early optimism in the first week of the year, equity markets have cooled off and are trading with more caution as the optimism about vaccinations has been offset by increased lockdown restrictions due to the continued rapid spread of the virus.

Today’s focus will be on incoming US Treasury Secretary Janet Yellen’s address to US policymakers as she tries to make a case for Biden’s stimulus package. Whilst a $1,400 increase in the stimulus seems so to be fully sold, Yellen will need to convince fiscally conservative lawmakers that an increase in the minimum wage will not cause an unsustainable rise in US debt, and it is a necessary measure in the short-term to stimulate the economy. I expect equity markets to keep an eye on this development.

The FTSE 100 is slowly building upside momentum as the British index was unable to take advantage of yesterday’s afternoon bullish run in Europe. A reduction in the number of daily infection and death rates seems to offer some solace to investors as the UK remains the European country with the highest vaccination rate.

That said, there are increased concerns that as more people get the vaccine we could see a change in behaviour, and social distancing measures may be relaxed, leading to a possible spike in cases before the vaccine takes its full effect.

FTSE 100 Daily Chart

From a technical perspective, the FTSE 100 remains weakened whilst below the 6,800 line, despite the lower bound of an ascending wedge keeping short-term support in place. A daily close above 6,800 would cement the case for FTSE buyers to attempt a new break of the 76.4% Fibonacci (6,895) after we saw a failed attempt at the beginning of the year. If so, the 7,000 mark will be the next objective for short-term bulls, at which point we may expect to see some strong resistance around the 7,200 area.

To the downside, short-term support remains on the lower bound of the ascending wedge. A break below this line may be an attempt to push the FTSE 100 below the 6,600 level, at which point it becomes vulnerable to a bearish run towards the horizontal support line at 6,255. Before this area, there are a few supports that may stop bearish pressure, firstly at the 61.8% Fibonacci (6,489) and then the low of Dec 21st at 6,311.

of clients are net long.


of clients are net short.

Change in	Longs	Shorts	OI
Daily	16%	10%	14%
Weekly	52%	-36%	2%

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— Written by Daniela Sabin Hathorn, Market Analyst

Follow Daniela on Twitter @HathornSabin