FTSE 100, DAX 40 and CAC 40 give back gains ahead of US unemployment data

​​​FTSE 100 comes off its near six-month high ​

​The FTSE 100 is seen coming off its near six-month high at 7,618 ahead of Friday’s US non-farm payrolls (NFPs) data as traders who had bought equities over the past month or so take some of their profits off the table within a key resistance area. It consists of the 7,621 to 7,671 April-to-June highs.

​Short-term a fall towards the 7,515 September peak and the minor psychological 7,500 mark may thus ensue with the area around the 7,577 August peak acting as potential minor resistance. ​

While Monday’s low at 7,421 underpins, however, the medium-term October-to-December uptrend remains valid.

​DAX 40 consolidation ongoing ahead of US unemployment data

​The DAX 40 is taking a breather, following its steep, over 23%, October-to-November bear market rally amid hopes that China might loosen its strict Covid-19 policy and as market participants await US unemployment data which could influence the rates outlook.

​On Thursday the DAX 40 gave back some of its recent strong gains with it revisiting the October-to-December uptrend line at 14,454 which is expected to soon give way since this week’s near six-month high at 14,606 hasn’t been confirmed by the daily Relative Strength Index (RSI). ​

This means that negative divergence can be seen on the daily chart and points to a likely retracement lower soon taking shape. This isn’t expected to lead to a large decline in December, however, since the Chicago Board Options Exchange (CBOE) Put/Call ratio has quickly fallen to low levels under 40% over the past few weeks, showing that far more puts than calls have been bought over that time.

​When this happens, equity markets tend not to fall very far and, conversely, have a high probability of rallying in the near future. Furthermore, since 1950 there have been three times as many positive as negative Decembers for markets such as the S&P 500 which European equity indices are influenced by to a large extent. ​

Only a slip through this week’s low at 14,325 would trigger a minor top formation in the DAX 40 and put the mid-November lows at 14,150 to 14,125 back on the map.

​ ​The CAC 40 falters at key resistance ahead of US unemployment data

​The French CAC 40 index’s advance of over 20% has taken it to an eight-month high before being capped by the area seen between the late April high at 6,759 and the late March high at 6,831 which represent key resistance ahead of the publication of US unemployment data. ​

The two-month support line at 6,730 is thus being revisited with a slip back towards the August peak and this week’s low at 6,641 to 6,626 now being on the cards, especially since negative divergence can be spotted on the daily chart.

​While the index remains above this week’s low at 6,641, however, the October-to-December uptrend remains valid.