FTSE maintains the Trend Support as the Pound Helps

FTSE maintains the Trend Support as the Pound Helps
by, David Frank, Economist, Bullish Markets

Points to consider in this FTSE article:

• The FTSE 100 continues to hold at trend line support.
• A daily close below this key level will not scare the bulls away until a drop below the horizontal support.
• Global risk appetite is supporting UK stocks.

The headline stock exchange in the United Kingdom (UK), FTSE 100, is moving higher from where it was after the Brexit vote. This is a positive development. Traders will continue to use this as a guide over the coming days. They should also realize that a close below the trend line support is not bearish. A change in the overall model, to bearish, probably will not occur until a break below the horizontal support pivot. However, it would suggest a weakening which could cause a pause on the long trades, especially if it extends to the mid-August levels.

Taking a broad look into London’s stock exchange, global risk appetite has been, generally speaking, supportive of their stocks. We do not have a snatch everything up environment but the overall sentiment is enough to keep equities buoyed. Overnight, the Nikkei 225 pushed higher and is now trading at its highest level since May. Both the French stock exchange and the German stock index are now nearing multi-week highs. The equity markets in the United States are, or have become, the laggards, as they continue to consolidate off all-time highs.

There is also the matter of the weak Sterling Pound that is helping stocks, primarily, UK exporters. This is supporting the FTSE 100 at the moment. There also seems to be some good deal of offshore capital moving into the British stock market. Definitely something to keep an eye on.

FTSE Technical Analysis

[chart]

Please refer to the above daily MT 4 chart for today’s daily technical analysis. As long as the British stock exchange trades above the trend line, seen on the above chart, or the peaks which are now support near the October 13 low at 6,930, then this exchange remains fairly bullish.

There is no key resistance levels until the record high of 7,129.70 to speak of. Should global stocks turn weaker or the Pound gains steam and moves higher, then expect the above mentioned support levels to remain under siege. Especially with the key event risk on tap for later today.

The European Central Bank (ECB) will be announcing their monetary policy and interest rate decision later this afternoon. While its last monetary policy decisions have done little for market reaction, will an inevitable taper with their current quantitative easing (QE) program provoke a reaction? The European Central Bank has been nearing its natural limit on viable asset classes to purchase for its QE program. Further, there is evidence the return does not justify the cost to keep this program going. When this taper does happen, we can look at the Fed’s own taper back in 2013, and the temper tantrum the financial markets threw as a guideline.

It is expected we will hear much in the way of how the central bank will taper its QE program in its after policy remarks. These could rattle markets.

 

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