European indices flat after Wall Street rally

FTSE 100 rally stalls as inflation hits 40-year high

The FTSE 100’s 5% rally from last week’s 7,157 low, made close to the February low amid volatile trading due to recession fears, seems to be slowing down as the UK annual inflation rate increased to 9% in April versus an expected 9.1%, its highest level since 1982, up from 7% in March.

Nonetheless a rise above today’s overnight high at 7,545 would put the 7,621 early May high on the map. Above this level key resistance still beckons at the 7,657 to 7690 region which is made up of the January 2020, February, and April highs and as such is likely to cap.

Support below yesterday’s 7,460 low can be found along the 55-day simple moving average (SMA) at 7,427 and also at the 2 May low at 7,390.

Provided the latter level underpins, a continuation of the last few days’ advance is likely to take place in the course of this week.

DAX 40 revisits its breached downtrend line

The DAX 40’s 6% recovery rally from last week’s 13,275 low, triggered by investors buying stocks at discounted levels in sectors such as commodities, healthcare and utilities, seems to have paused at yesterday’s 14,282 high with it slipping back to this year’s breached downtrend line, now support line, at 14,172.

Slips are likely to find support along the 55-day SMA at 14,037 with further support seen between the mid-April low and Wednesday’s high at 13,882 to 13,875 not expected to be revisited today. Further minor support can be spotted at the 13,807 2 May low and at the 13,538 April trough.

While the index remains above yesterday’s low at 13,998 on a daily chart closing basis, the early May high at 14,315 may be probed. If bettered, the late April peak at 14,599 would be next in line.

For a longer-term bullish picture to emerge, a rise and daily chart close above the late April high at 14,599 needs to take place, though.

S&P 500 nears downtrend channel resistance line

The S&P 500’s recovery from last week’s low at 3,860, made close to the 38.2% Fibonacci retracement of the 2020-to-2022 advance at 3,812, is getting ever closer to the two-month downtrend channel resistance line at 4,119 as US retail sales rise for the fourth straight month.

Retail sales rose by 0.9% month-on-month in April, versus an expected 0.7%, following an upward revision to 1.4% in March, and showed that American consumers continued to spend despite high inflation, albeit at a slower pace than in the previous three months.

A break out of the downtrend channel and a rise above the 4,107 to 4,142 February and March lows on a daily chart closing basis is needed for the recent advance to gain traction.

If this were to happen, the late April and current May highs at 4,305 to 4,308 would be in focus, a rise above which would be encouraging for the bulls and could spell the end to this year’s decline.

Minor support below the psychological 4,000 mark can be seen around the 9 May low at 3,967 and more significant support at last week’s trough at 3,860.