FTSE 100 Remains Bearish Ahead Of NFP

The outlook for the FTSE 100 is little changed from yesterday. It’s choppy around the 5880 level and will continue to be so for the next few hours as traders tend to be hesitant to enter with fresh positions ahead of today’s U.S. Non-Farm Payrolls report. A Bloomberg News poll projects an NFP outcome of 190k from 295k, and for the unemployment rate to remain unchanged at 5%.

My main case would be for a higher than expected NFP outcome to boost the FTSE 100 as U.S. stock markets gain (more people in work would highlight that the economy is doing better than expected).

However, a very strong NFP may also trigger a selloff in crude oil prices, which is FTSE 100 negative. At this stage it is hard to know what will be the main driver.

From a technical perspective, the trend is bearish below 6085 and may consequently reach the January 26 low of 5767 and the January 20 low of 5601, in the case of an extension. The break to 5767 is easy to understand as it’s a classic breakdown signal and some traders will be short on the break with a protective stop above the latest swing high (right now 5950).

It’s also worth noting that strongminded bearish traders may use the current rebound to short. The index has corrected 50% of its decline from last week’s high of 6125 and this would generate a potential loss of 170 points vs. a potential gain of 313 were it to reach its January low.

Bullish traders will wait for the trend to turn neutral, which may take a few days.

FTSE 100 | FXCM: UK100