The headline index is tipped to open a fraction lower morning, according to financial websites, despite strong overnight gains on Wall St, as Greece heads ever closer towards bankruptcy after failing to strike a deal with its creditors, while Asian markets were mixed...
US & ASIA
In the US last night, the Dow leapt 263 points to 17,976, while the Nasdaq added 56 points at 4,947 and the S&P 500 climbed 25 points higher to 2,086.
In Asia today, the Nikkei was recently down 68 points at 19,348 and the Hang Seng had gained 117 points at 24,972.
WTI crude oil traded at $48.1 a barrel and Brent at $55.88.
In the corporate diary today, trading statements are due from MITIE Group and Thomas Cook Group, interim results are expected from Inland Homes and James Halstead and final results are scheduled to be released by Chesnara, e-Therapeutics, Hydrodec Group, Kingfisher, LiDCO Group, Martinco and Ocean
Last week’s decline has taken its toll on sentiment, but the trend in the FTSE is still up. The UK index closed down on four consecutive days and is now in a support area, a rally is imminent. Weakness in metal prices and mining stocks contributed to a negative finish on Friday, and Bank of England Governor Carney added pressure on stocks after saying that the central bank is still on track to raise interest rates despite subdued inflation. Fed Chair Yellen also said that US rates would likely start rising later this year but the pace of tightening would be data-dependent.
April is a positive month for stock, but the period from May to September is not the best period to hold stocks, so from May seasonal influence is not in favour of a rally. This year we have conflicting signals between rising interest rates in the UK and US sometime during the summer and deflation spreading in Europe. All this is negative for the stock market. Furthermore we have the UK general election in May, another reason to be cautious. For these reasons upside is limited this year, the FTSE may rally to 7100 to complete an ending diagonal, that is the best level we will see in 2015 I believe.
Last week sharp pullback was too deep to be labelled a fourth wave, the FTSE retraced 62% of the previous rally. In general a fourth wave retraces a small portion of the third wave. This means the pullback was the second wave inside wave 5. In an ending diagonal the norm is to have three waves inside wave 5, if the rally to 7065 was the first wave and the current decline is the second wave, the next move will be the third wave up. For this rally to unfold properly it would help if sentiment could turn bullish. I expect the BTI to turn up as the rally unfolds.
The 34-day BTI has turned up and is now confirming the BTI (both rising), we can say that sentiment is bullish. When sentiment is bullish the FTSE is more likely to rise than to fall. That’s because what is bad news is interpreted as good news. For example if we see a bad economic report the index will drop but not for long, investors will find a reason to buy.
Similarly what scares investors is quickly forgotten. For example a combination of factors such as rising oil prices and Greece new deadline was the reason behind the latest decline. Oil is rising because Saudi Arabia is involved in fighting rebels in Yemen, this is a concern but next week I bet you investors will adapt to this new situation. They will also be more optimistic about Greece and the stock market will rise.
Yesterday we saw a deep retracement as I was expecting, the FTSE has retraced 50% of the previous rally. If the trend is up as I suspect the index will rally today and next week.
The headline index is tipped to open moderately firmer this morning, according to financial websites, recouping some of yesterday's heavy losses, while escalating troubles in Yemen and the ongoing who-blinks-first standoff between Greece and its creditors continue to affect market sentiment.
Elsewhere, Wall St turned in another disappointing performance overnight, while Asian markets were also lower in early trading today.
US & ASIA
In the US last night, the Dow shed a further 41 points closing at 17,678, while the Nasdaq fell 14 points to 4,863 and the S&P 500 edged 5 points lower to 2,056.
In Asia today, the Nikkei was recently down 222 points at 19,249 and the Hang Seng had fallen 22 points at 24,475.
WTI crude oil traded at $50.27 a barrel and Brent at $58.07.