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FTSE adds more gains and eyes the 38.2% Fibo retracement on a break of 7000

  • The UK's FTSE stayed with the bid on Tuesday with the optimism surrounding Sino/US trade relations and the prospects of a delay to Article 50 being triggered that was boosting a number of UK sectors, including retail, again, and construction.
  • The FTSE 100 ended slightly below its session highs, adding 0.7% to 6,861.60. 

A U.S. trade delegation member was reportedly saying that yesterday's talks had gone well and are set to continue on Wednesday while cabinet-level talks were due to take place later on this month. In addition, President Trump was out on Twitter saying that talks "are going very well". 

Yesterday, there were reports floating around, resurrected by the Telegraph,  that the UK officials are looking at potentially getting an Article 50 extension due to doubts that Theresa May's agreement is about to be declined by MPs when they come together to vote next week in The House of Commons. However, it also suggests that a no deal exit is looking to be averted which adds to the optimism in domestic share markets. Another Telegraph report suggested that Prime Minister Theresa May was in secret last-minute talks with EU leaders about possibly extending the 29 March Brexit deadline. However, Brexit Secretary Stephen Barclay stressed that the government remains committed to leaving the EU in March.

UK data

As for domestic data, Halifax reported that house prices surged beyond expectations for December's market, up 2.2% compared to a 1.2% decline in Nov, beating the expectations for a 0.2% increase. Year on year, house prices climbed 1.3% after a 0.3%increase in the prior month, beating expectations for a 0.4% jump.

Best and worst

On the corporate front, paper and packaging companies DS Smith and Smurfit Kappa were outperforming with Jefferies seeing an opportunity for a re-rating in the European packaging sector. Electrocomponents was also on the rise after an upgrade from Jefferies. Broadcaster ITV gained on speculation that the signing of a five-year partnership between Sky and STV could make a tie-up between ITV and Sky more likely. Retail was mixed with Next and Marks & Spencer boosted by the Brexit news while Morrisons lagged on wholesale growth over the Christmas period. Tesco and Asda were top of the big four, while Sainsbury's was bottom. The top performers were Smith (DS) (SMDS) 325.20p 6.27% and then Smurfit Kappa Group (SKG) 2,210.00p 6.25% ahead of Next (NXT) 4,849.00p 5.99%. The worst performers were Morrison (Wm) Supermarkets (MRW) 212.60p -3.21%, then BT Group (BT.A) 231.35p -2.77% and Fresnillo (FRES) 895.80p -2.21%.

FTSE levels

Technically, the FTSE 100 has climbed to the 23.6% retracement Fibo of the early summer 2018 decline which is a level reinforced by the convergence with the late October 2018 lows. It is a strong resistance level fortified by the 50-D SMA ad confluence of R1 which is the main stumbling block for bulls at this juncture. However, bulls have stepped back to the plate in defiance of the prior day's closing doji and bulls can target the 7000 psychological level on a break of the 50-D SMA. The 38.2% Fibo of 7041 guards a run to the 50% Fibo of the same range that is then located at 0.7204. Technical indicators, such as  the RSI and MACD and are also in positive territory, leaning with an upside bias.


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