Written by Fouad Razaqzadeh
The initial excitement surrounding the possibility of central banks adopting a more dovish stance has faded, and earnings calendar results from many companies have fallen short of expectations.
Burberry Group (OTCPK:BURBY), L For example, it saw a significant decline of up to 9% in its shares, which it attributed to lower demand for high-end products, which could hinder the company from achieving its sales expectations.
HelloFresh ( OTCPK:HLFFF ) also faced a setback, with its shares falling nearly 20% after its sales forecasts fell. Additionally, Cisco Systems (CSCO) saw a 10% decline in pre-market trading after reporting a slowdown in new product orders.
FTSE: Is it time to keep up with global indices?
After hitting a new all-time high in February, the FTSE has struggled to find any sustained support, weighed down by concerns about China, the UK’s faltering economy, and rising prices. Interest rates around the world.
But we have some positive data from China, the UK and the US this week, which could mean the worst days are over. Indeed, the fact that UK inflation fell sharply to an annual pace of 4.6% from 6.7% previously created some comfortable upside on Wednesday.
Although most of these gains have since been lost, there are some technical signs that suggest the FTSE may be able to start rising again amid waning macro fears.
Frustratingly for the bulls, the FTSE has not been able to enjoy the same upward momentum seen in other European and US stock markets over the past three weeks or so.
In this regard, the FTSE has a lot to do. But in recent days, the FTSE has managed to climb back above the 21-day EMA and resistance at 7,450 points.
Therefore, there have been some signs of bullish momentum returning to the UK markets. This 7450 level has been tested from above at the time of writing, meaning there is a chance the bulls will emerge here to lift the index heading into the second half of the day.
Although the UK index has made a series of lower highs throughout this year, it has not completely sold off either, remaining, for the most part, in a broad consolidation range.
The index managed to hold above the low of 7202 it formed in March after several bearish attempts to push it below this level – twice in the summer and again in October.
The upside resilience to all macro risks is very impressive. If it can weather the storm with minimal damage, the index may be able to start rising on any good news now.
I think there is a good chance we will see a rally to test the 200 day average and previous resistance in the 7600-7620 area next.
DAX: German index outperformance tests key resistance
In contrast to the FTSE, the DAX is much closer to potentially reaching the all-time high it reached in July. What’s more, since its lowest point in October, the German index has risen more than 8% compared to just 3% or so achieved by the FTSE over the same period.
The DAX has been a better indicator for the bulls, but that doesn’t mean the outperformance will necessarily continue going forward. The German index has now reached a potential resistance area of 15,800 to 15,850.
Here the 61.8% Fibonacci retracement level versus the all-time high meets the origin of the previous breakdown zone.
However, given the recent bullish momentum across global stock markets, and the fact that many support levels have collapsed, we may only see a modest pullback and consolidation rather than a sharp sell-off to indicate that the trend has turned bearish again.
Therefore, I would be more inclined to look for dips that can be bought near support levels. The next major support area to watch is around 15575 to 15640. This area was previously resistance, and we have the 200 day moving average in play here.
US indices lead global stock markets amid hopes for peak inflation and interest rates
It’s mid-November, and US stock markets are enjoying one of their best stretches of the year, all thanks to optimism that interest rates will start to fall in the not-too-distant future now that inflation is on a downward path.
US markets look a bit overbought despite the sharp three-week rally, especially the tech-heavy Nasdaq, so there is a risk of a pullback in the short term.
But with many resistance levels collapsing in this breakdown, any potential short-term weakness should not be confused with a bearish reversal, unless the charts tell us otherwise and/or the Fed begins to back off expectations of aggressive rate cuts. .
The latest gains this week were in response to data released on Wednesday that showed further signs of easing inflationary pressures, as prices paid to US producers unexpectedly fell in October by the most since April 2020.
This came on the heels of the weak US CPI reading the previous day, which sparked massive moves in financial markets. A sharper-than-expected decline in inflation in the UK also helped lift sentiment in Europe, as did signs that the recovery in China is beginning to take hold.
Meanwhile, slightly stronger-than-expected US retail sales and the Empire Manufacturing Index show that the world’s largest economy continues to defy recession expectations.
Originally published on MoneyShow.com
Editor’s note: The summary points for this article were selected by Seeking Alpha editors.
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