FTSE Technical Analysis

Monday, February 11, 2013, Marketing Communication FTSE 100, Daily Please click on graph above to open a larger image In the past couple of weeks the FTSE has posted some minor profit taking, bringing the index off the early 2013 highs. As yet no major technical damage has been done on this selling and the price action remains in the bullish trading range, which itself is an acceleration within the bullish medium term trading range, red areas. The Gold circle flags up an interesting candle formation, as a possible Falling Three candle pattern has formed. The standard pattern has three small white trading days contained by two large negative days, with the last trading day posting a fresh low for the pattern. It can occur however with just two days of central price action, as in this case. This pattern essentially highlights a double Harami pattern, where the first bearish day, itself a bearish engulfing candle pattern, was then followed by two inside days, signalling the a possible end of momentum to the selling, however the strong selling that materialised on the last day, which opens under the close of the previous day, and then closes at a fresh low, often signals some further weakness ahead. The only slight caveat is that ideally you would want to see this pattern after more of a defined minor bearish trend. The RSI trend line has been breached on this near term profit taking which is slight concern, but RSI should be used a confirming indicator not a trigger, so while the price action remains in the strong bullish trend posted since November 2012 there would seem to be no major concerns here, indeed even a break under this near term trend would only open up a possible move to the lower end of the more medium term trend down at 5,800. So in summary the FTSE needs to post quite considerable falls in the weeks ahead in order to negate the positive moves posted in the recent weeks. The short term profit taking could continue for the week ahead, however the risk/reward is seen as poor from the short side. Traders could use any breaks above the recent Falling Three candle pattern as buying areas as this could signal a bullish flag formation. Leaving a hold long stance for now, add on breaks above current flag formation, standing aside from the Falling Three except for the very active. Over the more medium term we would see investors reducing on breaks under the strong trend from November 2012. Free Access Seminar on Elliott Wave Counting Our next seminar will be on Elliott Wave Analysis.  The presentation will be at our office at One Churchill Place, Canary Wharf, London. Elliott Wave Analysis is one of the more esoteric technical tools and as a result it can be open to abuse and criticism. However the basic fundamentals, which will be covered in this seminar, can provide a useful framework for trading. Registration is freely available to all, not just Cantor Index clients. If you would like to register for what we hope will be an informative and enjoyable evening, please cklick on the banner above to open the registration page, or alternatively please contact us by email and we can add you to the guest list. FTSE 100, Weekly Please click on graph above to open a larger image Last updated, February 4th, 2013 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 had a hard time breaking up through the 6,000 area over the past couple of years, but that it has now made a sustained break up through this major resistance. 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. Pattern followers would describe the price action in recent years as an ascending triangle, with the lows in 2011 and 2012 getting progressively higher, while the 6100 caps the gains. Basic pattern analysis takes the height of the pattern and projects this onto the break. So using this logic the FTSE is looking set for a push up to its all time highs. Elliott Wave followers may instead see a 5 wave impulse pattern and abcde triangle correction, which broadly follows the Elliot Wave rules, where Wave 4 does not overlap with Wave 1, and Wave 3 is not the shortest line and wave c of the ABC, not wave b, extends into an ascending triangle, green letters. The upside potential for this count is significant to say the least as it would be targeting a return to the all time highs as it suggests the start of a new five wave impulse wave ahead. For the medium term then the outlook is positive and improving, breaks under the medium term supports are required, or more obvious bearish Elliott Wave counts are needed, to turn more negative. FTSE 100, Monthly Please click on graph above to open a larger image Text last updated, February 4th, 2013 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. 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. Moves under the longer term trend line, far right red diagonal line, could trigger the start of a more significant retracement, as seen with the breaks lower in 2001 and 2008. The breaks above the 2011 highs have opened up more optimistic long-term targets, with moves up to the 2007 highs now seen on the cards, while the strong longer term trend holds. S&P 500 Graph, Monthly The S&P monthly graph is uploaded to show how the broader US index has posted a broadening formation over this period, posting higher highs in 2007, and lower lows in 2009, and that the recent moves have brought the index up close to its all time highs. Nikkei 225, Quarterly, Semi-log Please click on graph above to open a larger image Text last updated, December 3rd, 2012 Enclosed above is a quarterly graph on the Nikkei. We include this for those readers who may simply 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 indeed some have been, in major bearish trends for over 25 years. Contact Us For Spread Bet Sales:- 0044 (0) 207 894 8800 For CFD Sales/Traders:- 0044 (0) 207 894 8883 E-mail:- sales@cantorcapital.com Graphs Graph images are created on Bloomberg, and remain under copyright to Bloomberg. Depending on your email settings the images contained in this note may not be downloaded correctly on the first viewing. Select the view 'Web version' link on the header, which will open a browser window that will display the images correctly. 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