FTSE 100 index capped at critical zone, stochastics point to a 50% mean reversion of Feb 8th confluence support

Trade optimism ran the Asian market higher overnight, albeit with some initial caution following China press reporting that there were still matters that needed to be resolved, but on the whole, things were moving in the right direction. However, the FTSE was suffering a blow from a bid in the pound with the greenback on the backfoot following last week's retail sales miss and dovish rhetoric from SF Fed Mary Daly who suggested that the central bank would hold off on raising interest rates in 2019, which was bolstering risk appetite in the currency market. At the same time, trading volumes were down as Wall Street was closed for the Presidents' Day holiday. There were no major economic releases in the UK nor from across the Channel. 

Looking ahead, we will have some key jobs data from the UK which follows a solid retail sales report from last week, and negotiations between China and the US are set to continue in Washington D - (An extension looks the most likely outcome on the trade front, which may be a short term boost for markets, but the longer it drags on, the more pessimistic traders may become). We will also have the FOMC minutes this week which may shed some more light on the Fed's thinking concerning the U.S., global economies and the U.S. rates outlook. 

Best and worst performers

On the corporate front, the top performer was Reckitt Benckiser Group (RB.) 6,296.00p 4.64%, followed by Micro Focus International (MCRO) 1,748.50p 4.08% and then Next (NXT) 4,849.00p 2.84%. The worst of the bunch was Hikma Pharmaceuticals (HIK) 1,718.50p -2.30%, followed by International Consolidated Airlines Group SA (CDI) (IAG) 649.80p -2.11%
and then Smith (DS) (SMDS) 346.50p -1.98%.

FTSE levels

The top flight index ended last week completing four consecutive days of gains and breached the 50% Fibo target at 7222, with the confluence of R1. This was also a key trend line resistance level, and horizontal support level made up of Sep 2018 lows, where on first bullish attempts, offers have started to emerge. RSI was capped at 70 as the index fails ahead of the menacing resistance of the 200-D SMA overhead at the round 7300 level, a moving average that was last tested and breached momentarily back in Sep 2018. A break of the MA will look for the 61.8% Fibo target located at 7381. However, with daily stochastics well overbought, if the 7190/80 level support area doesn't hold, a downside mean reversion of 50% of the move from 8th Feb lows to 7164 guards a firmer 7060/70 area (made up of 38.2% Fibo of May 2018 highs to Dec 2018 lows and Feb/Mar 2018 and Feb 8th 2019 lows).