FTSE 100 comes off record high, DAX 40 and Euro Stoxx 50 one-year highs amid risk repricing
Outlook on FTSE 100, DAX 40 and Euro Stoxx 50 as negative divergence points to a probable sell-off.
FTSE 100 comes off its all-time record high
The FTSE 100’s rally to a new record high, close to the 7,950 mark, was thwarted by US indices selling off for a second day in a row as investors fret about further policy tightening by the Federal Reserve (Fed).
UK preliminary Q4 GDP came in as expected at 0.0% quarter-on-quarter versus a revised -0.3% in the previous quarter.
From a technical perspective, negative divergence on the daily RSI points to further weakness likely being seen with the 7,876 January peak representing the first downside target, followed by Tuesday’s 7,843 low. Failure there would have more bearish implications with the late January low at 7,708 being back in sight.
The medium-term uptrend will remain intact while the index stays above 7,708 on a daily chart closing basis.
Resistance is now found at the 7,913 early February high and then at the 7,948 all-time high seen on Thursday, above which lies the psychological 8,000 mark.
One-year DAX 40 high accompanied by negative divergence - caution
On Thursday, the DAX 40 rallied to levels last traded in February 2022 before forming a Gravestone Doji on the daily candlestick chart, accompanied by negative divergence on the daily Relative Strength Index (RSI), both of which point to a possible bearish reversal ahead of next Tuesday’s US Consumer Price Inflation (CPI) data release.
Furthermore, the DAX 40 is in the process of slipping through its 2023 uptrend line, a fall through which would lead to Tuesday’s low at 15,272 being eyed. If also slipped through, a swift descent may take the index back to its 14,992 to 14,904 key support zone which consists of the mid- to late January lows.
The medium-term uptrend will remain valid, however, as long as no bearish reversal takes the DAX 40 to below its 19 January low at 14,904 on a daily chart closing basis. It is where the index held for the second half of January and as such represents key support.
Resistance can now be spotted at the early February high at 15,553.
Euro Stoxx 50 comes off its one-year high
On Thursday the Euro Stoxx 50 made a one-year high at 4,276 before being dragged down along with US indices which are repricing the risk of further monetary tightening and as China’s inflation rate rises to a three-month high and Japan Producer Price Inflation (PPI) rises 9.5% in January and the Reserve Bank of Australia raises its inflation outlook.
Thursday’s high at 4,276 was made marginally above its February 2022 high at 4,260, above which the November 2021 and January 2022 highs can be found at 4,396 to 4,415 and represent major resistance.
Since Thursday’s high was not confirmed by a higher reading of the daily RSI, the risk of a bearish reversal soon being witnessed is elevated.
A slip through the 6 February low at 4,187 would push the 4,092 mid-January low back to the fore. While it holds, the medium-term uptrend remains intact, though.
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