The FTSE 100 is expected to reach the January 20 low of 5600 as long as price trades below last week’s highof 5949.

The index is slightly oversold and given this, a bounce to the 5769 – 5836 range may take place (0.382% to 0.618% correction of the current bearish leg). However, traders will probably see a bounce as an opportunity to short-sell the FTSE 100 as the trend is bearish below last week’s high of 5949 and therisk/reward ratiolies within the 5769 – 5836 range.

The FTSE is also oversold given the Bloomberg Commodity index, which suggests that it should be trading at5984, while the FTSE’s correlation to the DAX 30 suggests it should be trading at 5764. A correction to the5769 – 5836 range mentioned above, would make the FTSE100 neutral to both commodities and the DAX.

Traders that see the current selloff as being overblown, will probably hold off on bullish positions until last week’s high gives way.

German Industrial Production

Data out of Europe was soft this morning and German Industrial production declined by 2.2% YoY in December from positive growth in November, missing expectations of a decline to -0.6%. Export and import orders also declined month-on-month, which was softer than expected. See all data on our economic calendar.

U.S. NFIB Small Business Optimism

This afternoon U.S. NFIB Small Business Optimism, the ISM of small business, is expected to decline from 95.2 to 94.5 according to a Bloomberg survey. While JOLTS Job openings are expected to decline slightlyfrom 5431 to 5413 (analysts use this indicator to get a sense of where the unemployment rate is headed).

Wholesale Inventories are also on deck and this is an interesting economic indicator as it has been suggested for many months that the U.S. economy is heading into trouble.