Indices recover after difficult start to earnings season
Outlook on FTSE 100, DAX 40 and Nasdaq 100 as second quarter earnings season has begun.
FTSE 100 tries to hold above key support
On Thursday the FTSE 100 dropped to its 7,012 to 6,966 key support zone which is comprised of the June and early July lows on global recession fears and weaker than expected US earnings results from banking giants such as JPMorgan Chase & Co (All Sessions).
Provided that the index manages to stabilise above its 6,966 June low, a gentle recovery towards the two-month downtrend line at 7,177 may ensue.
Only a rise and daily chart close above the last reaction high – a daily candlestick high, higher than that of the candle to its left and right – at Tuesday’s 7,225 peak would begin a bullish trend reversal, though.
As long as the FTSE 100 remains below 7,225, the odds favour a fall through the 7,012 to 6,966 support zone with the March trough at 6,764 remaining in sight.
DAX slips for the fifth consecutive day
The sell-off in the DAX 40 amid fears that the planned 11 to 21 July maintenance shutdown of the Nordstream 1 pipeline might be extended by Russia once it is supposed to re-open, is ongoing with the index so far slipping to 12,432, close to its 12,386 early July low.
Worse than expected US earnings have also led to risk-off sentiment, pushing the US dollar higher on safe haven flows and global commodities and equities lower, amid worries of further aggressive Federal Reserve tightening with talks of a 100-basis point rate hike at the next meeting making the rounds.
Provided that the recent lows at 12,432 to 12,386 underpin, an end of week recovery rally may reach the two-month downtrend line at 12,735 and the 23 June low at 12,839. Slightly further up sits the mid-June low at 12,944 which may also act as resistance, together with the more significant 13,021 high from last Friday.
A drop through 12,386 would likely engage the 50% retracement of the 2020 to 2021 uptrend at 12,120. Only a rise and daily chart close above last week’s high at 13,021 would be positive for the DAX 40 and could lead to an extension towards the mid-June low at 13,220 unfolding.
Nasdaq 100 recovers from yesterday’s sell-off as US earnings season continues
The US earnings season has taken over from inflation as the main story, with the likes of banking giants JP Morgan and Morgan Stanley failing to hit the mark and warnings about the risk to the economy in the coming months being prevalent, all of which negatively impacted the Nasdaq 100 which dipped close to this week’s low at 11,451 before recovering from its two-month uptrend line.
Minor resistance above Wednesday’s high at 11,938 sits between Tuesday’s high at 11,998 and the 55-day simple moving average (SMA) at 12,086. More important resistance can be found between the late June and last week’s highs at 12,180 to 12,227.
A slip below Wednesday’s low at 11,451 would probably lead to the May low at 11,490 being back on the cards. Further down the late June and early July lows can be seen at 11,358 to 11,317.
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