UK FTSE 100 (.FTSE) up 2% as markets recover from coronavirus panic

UK FTSE 100 (.FTSE) up 2% as markets recover from coronavirus panic

UK FTSE 100 (.FTSE) up 2% as markets recover from coronavirus panic

Last Friday saw the index fall by more than four per cent, reaching the lowest level since the EU referendum results in 2016.

Panicked trading meant the market tumbled as investors grew concerned about a potential recession in Europe.

The reason markets were worried is because companies are struggling with the business impact of coronavirus.

Airlines are having to cancel flights, insurers are facing hefty bills as governments rule out travel and even companies such as Apple and Microsoft are expect to suffer from supply chain issues.

Because the indices like the S&P, FTSE 100, FTSE 250 and Dow Jones are tracking the share price of big companies, when the market worries about how those organisations will fare, the share prices fall.

If the market is reassured again, share prices start to climb slowly back up.

And today the markets have rallied slightly, with the FTSE 100 up 2.16 per cent this morning.

The confidence is partly driven by reports that policymakers will take measures to ease the economic impacts of the coronavirus outbreak.

Bank of England governor Mark Carney has said policymakers stand ready to help businesses and households through an economic shock caused by coronavirus that could “prove large but will ultimately be temporary”.

But experts are warning that we can expect more volatility in share prices as news and updates about coronavirus come to light.

Policymakers in the US introduce emergency rate slash to protect economy

In America policymakers have taken the decision to slash interest rates by half a per cent to fight the economic impacts of Coronavirus.

The emergency measures came as an unexpected shock, but will reassure markets in the States.

This is the fourth time the Federal Reserve System has cut rates since last June.

The Fed said: “The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity.

“In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided today to lower the target range for the federal funds rate by half a percentage point, to 1 to 1.25 per cent.

“The Committee is closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy.”

Cutting rates is another tool available to Mark Carney and the Bank of England if they decide it is necessary to protect the UK economy.

Technical Indicators

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

By the way, prices are vulnerable to a correction towards 7,254.21.

The projected upper bound is: 6,938.82.

The projected lower bound is: 6,463.36.

The projected closing price is: 6,701.09.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 26 white candles and 24 black candles for a net of 2 white candles.

A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 25.3008. This is not an overbought or oversold reading. The last signal was a buy 0 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 27.84. This is where it usually bottoms. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 45 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -96. This is not a topping or bottoming area. The last signal was a buy 0 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 10 period(s) ago.

Rex Takasugi – TD Profile

FTSE 100 INDEX closed up 63.310 at 6,718.200. Volume was 77% above average (neutral) and Bollinger Bands were 231% wider than normal.

Open     High      Low     Close     Volume___
6,654.8906,846.2806,654.8906,718.2001,277,185,408
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 7,026.49 7,430.61 7,354.42
Volatility: 35 21 17
Volume: 1,153,153,792 709,460,416 733,097,664

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FTSE 100 INDEX is currently 8.7% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of .FTSE at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on .FTSE and have had this outlook for the last 25 periods. Our momentum oscillator is currently indicating that .FTSE is currently in an oversold condition.

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