technical analysis overview courtesy of cantor index

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The technical situation on the FTSE has not changed greatly in the past couple of weeks, as the index remains within the near term trading range, red region, that we have been monitoring for a few weeks now.

On the daily graph we have kept the near term trading range, red region. In our last not we suggested that the index looked vulnerable to some short term profit taking, so the negative moves in the past few days have not come as a major surprise.

In our last note we felt it unlikely that this expected selling would be enough to break support on the first attempt, and we have not seen significant arguments to amend this view. As a result the current levels on the FTSE appear to look tempting to the buyers. As we can see the FTSE remaining within the current near term bullish through early September. Current price action is also close to a Morning Star candle pattern which also could buoy the bulls if the FTSE manages to hold onto these levels into the close

The near term highs around 5880 would be seen as the initial targets for the bullish traders, while the more medium term buyers would be hopeful of a move to the 2012 highs, up towards 6,000.

In summary then the FTSE has continued to post a solid H2 recovery. Significant resistance levels have been breached in recent weeks and the index is in a strong near term bullish trend, red region. Leaving an optimistic view for the remainder of Q3. With current levels look to be tempting the the shorter term traders to add to long positions. Breaks under the trading range would be required to turn more negative on this outlook.

Below is just a quick chart on Dow, highlighting that despite the wider market nervousness the Dow has pushed on towards its all time highs, upper red line. This long term chart highlights how the index took a few attempts to break through the 1,000 area during the 1960’s-1980’s. Then posted an extreme move higher to the end of the millennium. This move is all the more powerful as this is a semi-log chart.

Unlike the FTSE the Dow posted fresh all time highs in 2007, so the Dow has posted a long term broadening pattern, green lines, compared to the FTSE 100 which has posted a tightening formation over this period.

So the long term bulls will be hoping that the Dow can push through its major long term highs and post a bull trend comparable to that seen in the 1980-2005 period. While bears will feel the index will fail at this current attempt and more closely match the series of failures posted between 1965-1985.

On the S&P graph below we can see how the broader index has attempted to follow the Dow higher, but as yet has failed to confirm the Dow as it has failed to post fresh multi year highs of its own.

What is worth noting however is that the US index has posted a strong longer term bullish trading range, red region, compared to the flatter trading range set up on the FTSE.

So currently the Most bullish index is the Dow, then the S&P with the FTSE bringing up the rear. If the FTSE was able to post fresh multi year highs, confirming the more optimistic US indices, then we could see traders looking to buy the FTSE and selling either the S&P or the Dow looking for this longer term divergence to unwind. However the FTSE would need to confirm the bullish outlook first and this position should not be entered pre-emptively as these conditions could remain in place for some time.

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