FTSE 100, Daily
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In our last couple of reports have highlights how the UK market has made a clear break lower from the previous bullish trading range,red region. This nervousness has created significant headwinds for any UK stock buyers.
The retracement levels drawn on this chart, red lines, are calculated from the 2012 lows to the summer highs. These retracement levels are often useful. The FTSE has found support from the upper end of this retracement area, this buying has been strong enough to move the FTSE 100 back above its 20 day moving average, grey line. The Moving Average has been tracing out a clear slowdown in recent months and would suggest the market has moved into a sell on rallies phase.
On any near term weakness we suspect that the market could post quite a rapid move back down towards the 5664 area and the recent lows. While significant resistance remains just above 5,900 keeping any near term gains capped. As a result the recent rally seems to have attractive risk/reward for those looking to go short. With the recent highs at 5830 used as stop areas and 5664 as initial targets.
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FTSE 100, Weekly
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Last Updated, November 26th, 2012
The situation on the Weekly chart will take some time to change greatly, so the text below may remain broadly same week to week unless major levels are broken. As with the monthly chart below however we will update the graph each week, and post all the text so that new readers will have all the information to hand.
For the Weekly chart we can see how the FTSE 100 has clearly had a hard time breaking up through the 6,000 area over the past couple of years. Over this period the market has posted a strong bullish trend, lower red trend line as the index continues a strong recovery from the 2009 lows. This trend line is attempting to support the market up to the 6,000 major resistance area.
So over the weeks and months ahead we do expect a more heated debate between the two sides, as the two arguments continue to converge. A resultant break in either direction is unavoidable, the only question is how sizeable this move could be. Breaks under the longer term bullish trend line could see rapid moves down to 4783, the 2011 lows and the 50% retracement level highlighted. Whereas breaks through 6,000 would signal a positive longer term leg ahead for 2013.
The trend is you friend, so current moves down to the longer term bullish trend look relatively attractive areas for the longer term trader to add to long to positions. However due to the skewed risk/profile we do see any breaks under this trend as potentially triggering sharp moves lower. Leaving a bullish stance for now, albeit with a very a close eye on this medium term trend line.
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FTSE 100, Monthly
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Last Updated, November 5th, 2012
The monthly timescale naturally takes the long term view so the commentary in this section will only be updated as when market events dictate. So regular readers of this report will only need to read the monthly and weekly sections on a relatively infrequent basis. However we include all the information to give new readers the full picture.
The Monthly graph for the FTSE 100 quite clearly shows how the index posted an extremely powerful move into the end of the last century, first red line.
From the all time highs in the index at 6950 the FTSE slumped 50% to the 2003 lows. In hindsight we can see this move as an understandable and even justifiable re-examination of the strong gains posted in the previous 20-30 years. The market currently remains well above these lows, which tells us that the Eurozone sovereign debt issues, technically at least, are not as significant as the general press would have us believe.
The FTSE remains in a trendless state, having posted lower highs in 2007, and higher lows in 2008, converging black lines. Retracement levels calculated from the all time highs to the 2003 lows create some interesting levels. We suspect that these levels will continue to be of use for the quarters ahead, a break back under the 61.8% level would suggest a new trading range between 4367-5215 would be possible. This area also coincides with the possible neckline of a major bearish H&S Pattern. Which would suggest strong support seen on any weakness down to 4775.
In summary then the FTSE 100 remains in a trendless state over the long term, with lower highs and higher lows, trading in the shadow of the TMT sell-off. The FTSE currently remains more neutral in its outlook than the more optimistic S&P 500 and Dow, and breaks under the medium term trend line, red line, could trigger the start of a more significant retracement, as seen with the breaks lower in 2001 and 2008. Setting a cautious tone for 2013-2014.
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S&P 500 Graph, Daily
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Nikkei 225, Quarterly
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Enclosed above is a quarterly graph on the Nikkei.
We include this for those readers who blindly assume that all major stock markets are in a perennial bull trend, with only temporary bearish aberrations. This shows that G7 nations can be, and some have been, in major bearish trends for over 25 years.
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