Technical Analysis, FTSE 100

Monday, November 25, 2013, Marketing Communication FTSE 100, Daily In the past couple of weeks we remained nervous of some near term profit taking. There were some signs last week that the selling that had materialised may have already runs its course. The graph below details however that the near term bearish trend has continued, red region. The question now is whether this remains as the expected bout of profit taking or if it is turning into something more significant. Retracement levels calculated over the October rally, red lines, highlight how the moves lower have found support from the 38.2% area, which often acts as major support to minor corrections to the underlying trend. The price action remains well above the 50 day period moving average, green line, and the 50 period MA is well above the 200 day MA, orange line, so the basic technical measures remain positive. Over the quiet Christmas period it is commonplace for the FTSE 100 to gain quite sharply on the the thinner volumes. The FTSE 100 has attracted heavy selling interest at each move above 6,700 in recent months acting as significant upside resistance. It is possible therefore that before the New Year the FTSE could post a commodity style 'break up' in the weeks ahead, and post a rapid move above 7,000, and up to all time highs. Short sellers should remain extremely vigilant, to attempt to profit from any near term falls does not have favourable risk/reward in this environment. As a result we continue to view the recent near term weakness as a minor period of profit taking and maintain the positive outlook for the remainder of Q4. FTSE 100, Weekly The FTSE weekly graph, highlights how the index made a 50% correction to the 2009-2010 rally and from this point has been in a strong uptrend, red diagonal line. Highlighting the strong institutional buying over the past five years. While this trend line holds the longer term outlook on the index remains positive FTSE 100, Monthly, Semi-log The monthly chart details how the FTSE remains in the long term bullish trend, in place from the lows in 2008-2009. While this trend and the RSI trend remains in tact the longer term outlook remains bullish. S&P 500, Daily, Semi-log The S&P 500, like the FTSE, had showed some signs of being over extended in the near term, however the graph also details how this condition can remain in place for some time. As is so often the case the US markets have taken a much more optimistic tone. Following the minor sell-off early in November the S&P 500 has now pushed onto to post fresh all time highs. The broad US stock index remains in a very clear positive trend. S&P 500, Monthly, Semi-log The monthly graph details how the index has performed since the end of the 1990's bullish phase. 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