Yesterday’s stall for the FTSE350 at the 4000 level converted to a pullback today with Banks leading the slide dropping 1.7% on downgrades of the UK’s forecasted growth rate. O&G Services cratered today as PFC lost 30% on news of an SFO-led conviction for bribery. All the UK indices showed red today closing at their lows although volumes in general were lower than normal. The UKX dropped 1.1%, MCIX 1.6%, AIM All-Share 1.3% and TechMARK 0.7%.
Given the strong rally since the start of 2019, some profit taking was inevitable and a lower 1.2% GDP growth rate forecasted by Mark Carney may well have been a catalyst. However, the German DAX sank over 2.5% on poorer European data: the US markets also opened sharply lower. That none of the major indices have yet closed above their 200 MAs is a reminder that the longer-term trend remains downwards. Whether today is a pullback or a continuation of a broader bear market sell-off will become clear over the next few days and weeks. This rally has provided an opportunity to reassign capital and take some profits on short-term trades with a longer-term bias to the downside. That remains our stance until there is a material improvement in price relative to the 200MA (and the trend thereof). To amplify: 65% of the NMX and MCIX shares remain below their 200MAs while 72% of AIM All-Shares are below their 200MAs In the interim, the relative volatility makes for great trading weather if one is fleet of foot and not wedded to positions.
GBP rallied slightly today up 0.3% while Brent crude did a complete about-turn and had dropped over 3% at pixel in what looks like a change in the trend in place since end Dec 18 (with an overhead resistance at the $64 level back in evidence). Typically, it takes two or more closes below the 21EMA to signal a change in short term trend: today looks set to be day 1 and will remain key in determining overall market direction along with GBP. Copper and iron ore remain buoyant which is supportive of the resource sector.
Market sentiment today echoed the price action as the FTSE VIX gained 11%, the EU VIX 13% while the US VIX is up almost 20%. All do remain at relatively low levels.