What’s Next for S&P-500 and FTSE-100 ?

<p>Just as improving US macroeconomic figures began making the case for the latest records in US equities, today’s unexpectedly poor non-farm payrolls capped a week […]</p>

Just as improving US macroeconomic figures began making the case for the latest records in US equities, today’s unexpectedly poor non-farm payrolls capped a week of disappointments in US data (jobless claims and services ISM).  NFP fell to 88K in March (lowest since June 2012) vs expectations of 150K, while the unemployment fell to 7.6%– lowest since December 2008.  Shockingly bad poor jobs figures from Canada; a 54.5K plunge — biggest since Feb 2009; and the rise in unemployment rate to 7.2% from 7.0% will finally eliminate any signs of hawkishness from the next bank of Canada policy statement.

Watch Gold & Yields for Stocks Clarity

These poor jobs figures were so disappointing to the extent of delaying expectations of any tapering in the Fed’s asset purchases. This was best highlighted in today’s $30 jump in gold to 1581 and the 23-bps decline in US 10-year yields to 1.68%–lowest of the year. Gold, whose short-lived rally during the Cyprus-Deposits surprise reflected disappointment in the metal, shows the most enthusiasm during disappointing US figures, rather than event risk from the Eurozone. We continue to expect gold rallies to fade near 1600, before 1520 is retested anew.  US yields will likely test the next low at the 1.63 channel support. A close below 1.63 would delay the much anticipated gold sell-off.

Those preparing for the seasonal decline in global equities may be getting what they wanted. Add a few arguments from upcoming earnings season such as negative impact of foreign exchange translation and poor visibility from Europe and we may see 1,525 and 6,100 in the S&P500 and FTSE-100 respectively.

SP500 starts its pullback off the top of the 5-month channel, eyeing preliminary support at 1545 (Jan 4 trendline), followed by the next major target at 1502 (channel support). This would be signalled by a close below the 55-DMA of 1525. But current stochastics suggest stabilization near 1500 for now.

FTSE-100 appears to begin its first monthly decline after 10-straight monthly increases. This is starting with a break of the November trendline, which will likely extend into a retest of 6,100, translating into a 5% drop from the March peak. Unlike the S&P500, which appears to show relative resilience, the FTSE-100, lacks suggests the ultimate support to emerge neat 5,860.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.