It has been a very bad week for the FTSE 100 the previous one with the index dropping almost 300 points. It seems that investors are pricing in a rate hike from the Fed on their next meeting in December and that as I have mentioned many times drives capital away from the stock markets.
My personal view is that a move on December is not a done deal, sure the progress in the US economy and the recent figures justify a move but something tells me that the US central bank might opt to wait another month. The economic growth on a global scale is still lagging and that might drive the Fed to delay its move for another month.
However, the general bias is that the US central bank will move forward and it’s that exact bias that drives the stock markets. Today the FTSE 100 is attempting a correction but for the momentum to change a serious reversal is needed. I place my pivot point around the 6,200 points’ level and for me to consider going long on the FTSE a basis needs to be established above this area.
I wouldn’t be too confident of such a development taking place at this time, especially at the beginning of the week. I believe that investors will remain cautious and choose to wait for the release of the FOMC meeting’s minutes later in the week to get some insight on what the US policymakers are thinking.
If we see further confidence in the US economy from the Fed bankers and a sense of urgency to raise rates then the FTSE along with the other global stock markets will point lower once again. However any signs of doubt or concern might fuel a correction rally so all bets are off at this time. I do believe that the most likely scenario is a bullish view from the Fed that will result into fresh losses for the indices but I am also mindful of the possibility of a surprise.
I believe that a good area to re-establish short positions would be the 6,150 to 6,200 points’ range, especially if the Fed minutes reveal the bullish views I mentioned above. In that case a test of the 6,050 lows and the 6,000 points’ area is the most likely outcome so I am biding my time until Wednesday so I can be positioned in the best possible way.
I would like to remind you my new stock trading service that covers the best stocks in the UK and the US markets. The Artemis Stock Trading is the best way to build and develop a robust stocks and ETFs portfolio with daily suggestions on what to buy and what to sell. You can find more information on Artemis Stock Trading by clicking on this link.