European Open: Will the Dax be Next to Breakout?

Asian Indices:

Australia's ASX 200 index rose by 38.5 points (0.53%) and currently trades at 7,350.20
Japan's Nikkei 225 index has risen by 407.76 points (1.43%) and currently trades at 28,957.11
Hong Kong's Hang Seng index has risen by 218.17 points (0.87%) and currently trades at 25,180.76

UK and Europe:

UK's FTSE 100 futures are currently up 15.5 points (0.22%), the cash market is currently estimated to open at 7,223.21
Euro STOXX 50 futures are currently up 15.5 points (0.37%), the cash market is currently estimated to open at 4,164.56
Germany's DAX futures are currently up 57 points (0.37%), the cash market is currently estimated to open at 15,519.72

US Futures:

DJI futures are currently up 534.75 points (1.56%)
S&P 500 futures are currently up 47.5 points (0.32%)
Nasdaq 100 futures are currently up 14 points (0.32%)

Indices: FTSE confirms reversal pattern, eyes on the DAX

Along with global indices in general, the FTSE 100 finally broke higher yesterday in line with investor’s appetite for risk. Invalidating trend resistance, an inverted head and shoulders pattern was confirmed which projects a target around 7500. The next major resistance levels for bulls to conquer is the August high at 7224.46 and, if this is a real breakout, we would not want to see prices trade back beneath yesterday’s low.

We’re now waiting to see if the DAX can follow suit and break trend resistance, like the S&P 500 and FTSE 100 did. The daily chart closed at the high of the day although resistance was found at the 50-day eMA and trend resistance. This provides a pivotal level, but if we see a gap higher then our bias remains bullish above yesterday’s low around 15,300.

S&P 500 earnings scheduled for today

Q3 2021 Prologis Inc (PLD) Earnings Release
Q3 2021 PNC Financial (PNC) Services Group Inc Earnings Release

FTSE 350: Market Internals

FTSE 350: 4125.65 (0.92%) 14 October 2021

289 (82.34%) stocks advanced and 58 (16.52%) declined
8 stocks rose to a new 52-week high, 4 fell to new lows
56.7% of stocks closed above their 200-day average
41.88% of stocks closed above their 50-day average
15.38% of stocks closed above their 20-day average

Outperformers:

+ 7.0% - Baltic Classifieds Group PLC (BCG.L)
+ 6.2% - Harbour Energy PLC (HBR.L)
+ 5.8% - Darktrace PLC (DARK.L)

Underperformers:

·-13.2% - Qinetiq Group PLC (QQ.L)
·-4.15% - Domino's Pizza Group PLC (DOM.L)
·-3.12% - Close Brothers Group PLC (CBRO.L)

Forex: Consumer sentiment, retail sales and inflation expectations in focus

Trends established yesterday extended their reach overnight. The New Zealand dollar remained the dominant force in the FX space whilst the yen was offloaded across the board, with the only difference being that volatility was not as fierce.

The baulk of today’s data worth a mention is in the US session. Import prices are an inflationary input, so any rise or fall here is a proxy for factory gate prices. Retail sales is a proxy for consumer demand, with both data sets scheduled for 13:30 BST. Then at 15:00 we have the preliminary University of Michigan Survey which includes consumer sentiment and inflation expectations.

Whilst September’s consumer confidence print had nudged its way higher, the August read had plummet (somewhat suddenly) to a 10-year low. Therefore, another weak confidence print today could ruffle a few bullish/hawkish feathers if it breaks to new lows.

And then there’s consumer inflation expectations which remain near multi-decade highs. Whilst consumers are not generally credit with their forecasting abilities, they will change their spending habits if they believe prices will change in future, so policy makers track what they think. And should inflation expectations continue to rise it’s another tick on the ‘hurry up and tighten policy’ box for the Fed.

Commodities: Commodities broadly higher

WTI continues to move higher, yet volume is low to show a lack of commitment from the bull camp. A trend needs volume to be sustained, so without fresh buyers stepping in we suspect a correction (or pause in trend) could be due over the near-term.

Gold trades around 1795 near its 200-day eMA after printing an indecision candle yesterday. The longer it stays below 1800 the greater the odds of a pullback, but if it can break to new highs then the next resistance level is around 1820 (monthly R1 pivot). Falling TIPS (proxy for real rates) are falling which can be beneficial for gold prices.

Platinum is now above its 200-day eMA after rising to a 10-week high yesterday. We retain our bullish bias above 997.

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