Among equity indices two key correlations to watch out for are those between the big three in the US DJIA (US30), S&P500 (US500), and NASDAQ (USTEC). The other not so well followed is that between DJIA, S&P500, and the UK’s FTSE all three indices representing broad segments of their respective economies. Over the past two weeks it has been evident that the premise of the rally for the US indices from November last year, monetary easing, has eroded with the trajectory for inflation in the US again on the uptick leading to bearish breakouts. As such it is worth examining if FTSE is set to follow the current pullback in US equity indices.
The Case of FTSE (UK100)
The FTSE has been stuck in a broadly ranging market for the past three weeks unable to hold attempts at new highs for its rally from the start of the year. As with other major stock indices this rally has been driven by expectations of an easing by the BOE this year as inflation has significantly come-off its Nov 2022 highs of 11.2%, with expectations calling for a 3.1% print Wednesday, April 17.
Resistance
- 8045.1 – Moderate: Historical High
- 8010.4 – Minor: consolidation highs
- 7950.6 – Minor: previous intraday support
Support
- 7879.0 – Strong: Range Floor
- 7841.6 – Minor: intraday high
- 7797.7 – Minor: intraday low
- 7772.1 – Moderate: Previous Multi-month Resistance
Market is noting a clear divergence in the trajectories between UK Inflation and the US with speculations of a rate cut sooner than later persisting. This will likely continue to provide a floor for the FTSE with any approach of the Range Floor at 7879.0 a possible entry for bulls. Note however that a break below this driven by geopolitical factors could see UK100 following its US brethren and be an immediate short for us with the next significant support at last years multi-month resistance of 7772.1.
