Indices back under pressure as rebound falters
Outlook on FTSE 100, DAX 40 and Nasdaq 100 ahead of Fed chair's Congress testimony.
FTSE 100 slips again on recession fears
Following on the back of weaker Asian markets, hit by a Goldman Sachs recession warning, the FTSE 100 has begun to trade lower this morning after yesterday’s largest UK-wide train strike in 30-years, giving back some of its last couple of days’ gains.
The index’s minor recovery from last week’s three month low at 6,966 has so far managed to take it to yesterday’s 7,193 intraday high. While below it, the recent downtrend remains firmly entrenched.
A drop through 6,966 and the 6,946 October 2021 low on a daily chart closing basis would lead to the March trough at 6,764 being back in the frame.
Today resistance sits between the May low and yesterday’s high at 7,157 to 7,193.
DAX slips on recession worries
The DAX 40’s minor bounce off last week’s 12,944 low seems to have run out of steam at yesterday’s high at 13,444 with the index opening lower today and seen heading back down towards the 12,944 trough as worries of slowing demand and a possible recession weigh on the index.
A fall through last week’s low at 12,944 could lead to the March low at 12,432 being back in play.
For the current downward pressure to diminish a bullish reversal would need to take the DAX 40 to above yesterday’s high at 13,444 and ideally also above the mid-June high at 13,676. It was made within the 13,681 to 13,743 gap.
Nasdaq 100 back under pressure ahead of Powell’s appearance before Congress
The Nasdaq 100’s minor bounce off its one-year low at 11,037 ran out of steam at yesterday’s high at 11,640 ahead of Wednesday and Thursday’s appearance before the US Congress by the Fed chair, Jerome Powell.
Goldman Sachs' announcement that the risk of the US slipping into a recession within a year has doubled after last week’s aggressive 75 basis point Federal Reserve (Fed) rate hike also thwarted the recent minor recovery in US equity markets.
While the original June gap seen between 11,643 and 11,822 remains open, downside pressure is likely to prevail. A drop through and daily chart close below last week’s 11,037 low would be expected to push it deeper into the significant 11,072 to 10,677 support area which encompasses the July 2020 high, September and November 2020 lows as well as the 200-week simple moving average (SMA).
Provided that last week’s low at 11,037 underpins, the left over 11,755 to 11,822 gap may still get filled and perhaps the 20 May high at 12,092 be reached.
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