FTSE 100, DAX 40 and S&P 500 drop on recession fears
Outlook on FTSE 100, DAX 40 and S&P 500 as recession fears bite.
FTSE 100 consolidates further below its near six-month high
The FTSE 100 consolidates further below its near six-month high at 7,618 as UK house price growth slows sharply.
The Halifax House Prices index in the UK rose by 4.7% year-on-year (YoY) in November, the least since July 2020, compared to 8.2% in October. The average UK house price also declined by 2.3% versus October, the biggest drop since October 2008.
Short-term a fall towards the 7,515 September peak and Tuesday’s low at 7,503 is on the cards, a slip through which should engage the late November low at 7,421. As long as it underpins on a daily chart closing basis, the October-to-December uptrend remains intact, though.
Good resistance can now be found between the 7,577 August peak and Monday’s high at 7,599. Key resistance remains to be seen among the 7,618 to 7,671 April-to-June as well as November highs.
DAX 40 forms minor top
The DAX 40 is seen giving back some of its recent strong October-to-November gains of over 23% despite China loosening its strict Covid-19 policy as market participants instead focus on US growth, with warnings from US banks about a recession next year leading to risk-off sentiment.
With the DAX 40 having slid through the October-to-December uptrend line at 14,520 earlier this week, the mid-November lows at 14,150 to 14,125 remain in focus but may offer short-term support.
Immediate resistance above the 14,325 late November low comes in at the mid-November high at 14,442.
S&P 500 slips towards key support area on US recession fears
The S&P 500’s slide through the 200-day simple moving average (SMA) at 4,032 on increasing US recession fears for next year and global risk-off sentiment has taken it back to its key short-term 3,918 to 3,904 support zone.
It contains the 21 September, late October and early November highs which may hold on Wednesday on a daily chart closing basis. Should this not be the case, the 55-day SMA and early October high at 3,826 to 3,807 would be in sight.
Resistance can be seen along the breached October-to-December uptrend line at 3,975 and the minor psychological 4,000 mark.
Since the Chicago Board Options Exchange (CBOE) Put/Call ratio has been trading for much of November at elevated levels of up to 1.46, above the March 2020 1.28 peak, the odds of a sharp decline into the end of the year being seen are relatively low as the ratio tends to act as a contrary indicator, meaning that when a large amount of puts are being bought compared to calls, equity markets generally tend not to fall much further.
Instead, they 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 the S&P 500.
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