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Global stocks continue to grind higher

Market Analysis

UK100 & GER30, H4

December is traditionally a good month for global stock markets and the first trading week of December 2017 has not bucked the long term trend.  The worlds most important stock market (USA500) touched another all-time high last week at 2665.  The UK100 has closed the month of December higher than it opening prices 41 years out of the last 47. Since 1970 there have been only 6 years when the FTSE 100 closed lower. History suggests that overall there is a 87% chance of higher prices for the UK100 on December 31 compared to December 1. The source of this data is the Stock Market Handbook by David Schwartz, (which I first purchased in 1996). More recently the performance of the UK100 has been a little less impressive, the last 15 years has seen the index close lower than its opening price on 3 occasions in December (2002, 2o14 and 2015) before returning to trend last year.

The UK 100 opened the month at 7365 and drifted sideways for most of last week as the Brexit deal ebbed a waned, only to catch a bid on Friday. Mrs May’s deal with Mr Juncker early in the morning helped the H4 chart breach the 20 & 50 period moving averages and the psychological  7400 to generate a LONG position at 7406. The RSI at 62 and the Parabolic SAR remain positive and Target 1 is  north of the key 200 period moving average resistance at 7480 and Target 2 is the next H4 and daily resistance confluence at  7505.  The next level beyond this 7500 zone would be the 161.8 Fibonacci extension level and November and May highs from the Daily chart at 7585.  A breach and break of  the recent 7275 low would negate this move.

Elsewhere markets are cautious ahead of central bank meetings this week. The FOMC is expected to deliver a 25 bp hike, while ECB, BoE and SNB are all expected to stay put on Thursday, although especially ECB and BoE statements will still attract some attention after some above-forecast growth indicators, and with November inflation data due to be released during the week.  The GER30 is in a similar pattern to its UK neighbour and also driven by concerns over Brexit,  the EU summit more significantly the German coalition talks this week. A LONG position was triggered earlier today at 13,162 following a pull back from the strong rally on Friday, which again had broke and breached the 20 and 50 period moving averages.  Target is 13,250 and target 2 13,320. The next level beyond this 13,200 zone would be the November and all-time high at 13,515.  A breach and break of  the recent 12,845 low would negate this moveThe RSI (57) and parabolic SAR remain positive.

 

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Stuart Cowell

Senior Market Analyst

HotForex

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