technical analysis overview courtesy of cantor index

1 mins. to read

Last week we felt that the FTSE was looking solid in the near term trading range, red region, and that the probability looked highest for a continued move to the upper end of this channel. So the moves in the past few days have been largely as expected.

What is interesting is how the FTSE remains well under its 2011 highs and even under its March 2012 highs. This is interesting as the S&P 500 has broken its 2011 highs, and is now just 100 points under its all time highs around 1565. Simple Dow Theory tells us to remain cautious while two major indices fail to confirm higher highs. So while the FTSE stays under its long term resistance we feel the UK investors remain less confident on the outlook. This outlook naturally will be affected by the more active QE in the US, when compared to the Bank of England, and the resultant impact on sterling.

This notwithstanding we would still classify the FTSE as being lifted up by the S&P 500, rather than the FTSE 100 powering on upwards under its own momentum. However we would still suspect that the FTSE is likely to follow the S&P 500 and post fresh multi year highs in the coming weeks. The longer term question is whether the buyers will start to dry up if/when the FTSE manages to break back above the 6,000 area. We would suspect that investors would become increasingly nervous on such a move and we would expect to see funds switching funds into other asset classes on any such break higher.

In summary then the FTSE has continued to post a solid H2 recovery and the index remains in a strong near term bullish trend, red region. Leaving an optimistic view for the remainder of Q3, for now. Breaks under the trading range would be required to turn more negative. Current levels do look vulnerable to some profit taking, however shorting here would be unadvisable due to the strong underlying trend. 6,000 is looming, after an expected near term spell of profit taking.

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