The markets have been relatively quiet so far this week, with investor sentiment remaining largely positive thanks to the cheerful news we have heard from the vaccine front. Dips in stocks, crude oil, commodity dollars and emerging market currencies continue to be bought, while safe haven gold continues to struggle.
Today it was Pfizer’s turn to take the limelight back from Moderna. The pharma giant said that a final data analysis shows its Covid vaccine is 95% effective and plans to submit an application to FDA for emergency use in "days." The news was met with cheer as stock index futures extended their gains.
But the pace of the rally has slowed down somewhat over the past few days, despite the vaccine news. Investors are torn between expectations for a more normal future with the developments of vaccines and the current situation with the rapidly spreading virus infections and lockdowns, causing more economic pain across the West. However, as there is now light at the end of the tunnel, the downside has been limited for risk assets and the bullish trend has remained intact for the global indices and other risk assets.
Unless something changes dramatically, there is little reason for short sellers to step in aggressively yet. Thus, I think that the bulls will remain in overall control of price action for risk assets for a while yet.
FTSE sets stage for fresh breakout
It is thus worth keeping a close eye on the FTSE, is looking quite bullish as investors warm further towards financials, materials, industrials and energy stocks – constituents that make up the bulk of the shares listed in the FTSE 100 index:
Source: ThinkMarkets and TradingView.com
The UK benchmark index looks like it is following a path towards 7100-ish, roughly the point D of a potential Gartley – a Fibonacci-based technical – pattern. Obviously, that target looks miles away from here, but at least the path of least resistance remains to the upside for now. The index has spent a few days now consolidating near its recent highs and a fresh breakout could be on the cards to initially take us to a new post-lockdown high above the summer peak of 6511.
Meanwhile the index has help key support at 6300, which was previously resistance. For as long it doesn’t go below this level on a daily closing basis, the short-term bullish bias would remain intact. Insofar as the slightly longer-term technical bullish bias is concerned, 6040 is now the line in the sand for the bulls.