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The FTSE 100 is preparing for a wild 48-hours, as the FED policy meeting approaches and the UK Conservative Party brace for an official report into Downing Street parties that has now turned into a criminal inquiry.
Starting with the FED, a rate hike today, which is not out of the realm of possibility could sink stocks, is not out of the question. I suspect that the FED will sound even more hawkish, but not raise rates today.
Additionally, the UK has been getting increasingly involved with the Ukraine border crisis, which leaves UK stocks exposed if the worst case were to happen, and Russia moves into Ukraine.
Back to “Partygate”. The Metropolitan police commissioner, Cressida Dick, announced yesterday that her officers are investigating allegations of law-breaking. The country is now eagerly awaiting the results of the Sue Gray report.
Downing Street sources refused to be drawn tonight on whether the prime minister could give the green light for the report to be released as soon as Wednesday, but it is certainly expected anytime.
Cutting to the heart of the matter, this report is all about whether it is enough for PM Johnson to step down or resign. If it is, then we should therefore expect UK stocks to get crushed, as the Conservative Party has no clear replacement candidates for PM. And stock markets hate uncertainty.
Sentiment towards the UK100 has a slight bullish tint, which is a good sign for sellers. According to the ActivTrader platform some 43 percent of traders are bearish towards the UK100.
Ideally we need to see bullish sentiment in order for a further big correction to take hold. It looks like the current sentiment reading is not compelling enough to speculate which way the FTSE100 may move based purely on sentiment.
UK100 Short-Term Technical Analysis
The four-hour time frame shows that the FTSE100 has made another higher low, which has kept the dynamic of lower lows and higher highs in place at this juncture.
In order for selling to ramp up this dynamic needs to break. Frankly speaking, the way the dip has been bought is extremely impressive, so more upsides seem more likely than not.
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UK100 Medium-Term Technical Analysis
The daily time frame shows that the FTSE100 has recently been rejected from the top of a large rising price channel type pattern. The rejection has also seen the leading UK index move towards and bounce from its 200-day moving average.
If the rejection from the top of the channel holds then a further decline towards the bottom of the channel could take hold. The same is also true if we see price breach the top of the channel.
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