Technical Analysis - FTSE

Monday, July 1, 2013, Marketing Communication FTSE 100, Daily In the last note we felt that the market sell-off could appear too tempting for bargain hunters so the near term buying that has materialised is largely as expected. The question going forward is if this normal oversold buying, is the start of a more significant move higher, or merely a simple bear market rally. The price action is now at the 50% retracement level calculated from the 2012 lows to the 2013 highs. Over considerable and measured market moves the 50% area is often tested on a correction, and would be expected to offer some support. The price action has breached the bearish trend created from the May highs, black line, and the stochastic while over sold does look to be turning back above the signal line, so the more medium term buyers may be gaining confidence that this recent strength is the start of a more substantial move higher. Because of the trend line break, and the 50% level holding, there is an upside bias, but we will not get too optimistic until the 38.2% retracement level is cleared. As witnessed in mid June the 6390 area is expected to offer some resistance. In summary then the bargain hunting buying has done its job, lifting the index off oversold levels, through its bearish trend line and up through the 50% level, in order to continue from here the medium term buyers need to return to takeover. So the outlook is skewed to the optimistic outlook, but moves above 6390 are need to confirm. FTSE 100, Weekly Last updated, June 2013 The graph above throws up a possible medium term Elliott Wave count on the FTSE 100. We can see how from the 2009 lows there was a fairly clear impulse move higher, Red 1-5, followed by a simple expanded flat abc correction. From these 2011 lows the FTSE has posted the start of a new bullish impulse wave higher, with the current price action in Wave 4. Elliott Wave rules dictate that if this count is correct on any future weakness the FTSE cannot move into the range of Wave 1. As a result we would expect significant support from the Wave 1 highs, Gold line, which coincides with the 6,000 psychologically important level. This also suggests that Wave 5 ahead is set to post moves above the highs posted in May 2013. So using this count over the medium to longer term there are bullish arguments for a move up through and beyond the all time highs in the months ahead, and that this strength could start to fail early in 2014. 6,000 can be used as a level to negate this bullish count. Also of interest is how the recent sell-off has brought the index down towards the longer term bullish trend, red diagonal line, and towards major support of the 2011 highs. So in the medium term the FTSE has dropped down towards some major support areas, and bullish trend lines which may well attract buying interest from the longer term players. Only moves under the 6,000 area would start to create more serious downside concerns. FTSE 100, Monthly Text last updated, May 12th, 2013 The monthly timescale naturally takes the long term view so the commentary in this section will only be updated as and 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 on the price graph. 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. From 2009 the FTSE has posted a strong recovery and currently is posting moves up to its all time highs, moves already posted by the S&P 500, Dow Jones and DAX. The FTSE broke the upper bearish trend, black line, and continues to look set to follow the S&P 500 by posting a move up to its all time highs around 6950. 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. But while the resistance from the 2011 highs have been cleared, more optimistic long-term targets have been opened up, with moves up to the all time highs now seen as most likely, while the strong longer term trend holds. FTSE 350, Monthly Enclosed above is a long term chart on the FTSE 350 which has, unlike the FTSE 100, already broken through to fresh all time highs. This move indicates that the FTSE 100 was also set to post fresh all time highs in May, but only failed to do so by the over weighting of the under-performing banking and mining stocks in the index. S&P 500 Graph, Daily We noted last week how the S&P 500 moves lower have not been to the same scale as the FTSE 100. While the FTSE has traded down to its 61.8% retracement level, the S&P has found support from its comparable 38.2% level. As the economic outlook in the US continues to out-perform the global markets. The stochastics have failed to rally considerably on the last leg higher, which is often a concern that buying momentum is light. The price action has moved up towards the near term bearish trend, black line. Last week we felt that a buy FTSE, sell S&P 500 pair was not advised due to wider market positioning on the expected continued out-performance of the US economy over the medium term. In the very near term however the FTSE does look to out-perform in the coming days, largely due to coming off too hard in the late June sell-off. As a result we do see traders interested in the pair at the current levels, as above however this pair should not be considered for the medium to longer term as wider divergence could stay in place for some months while the green shoots of the UK economic recovery catch up with the US. S&P 500, Monthly The monthly graph is included to show how the broad US index has posted moves to record all time highs in 2013, within a broad expanding phase, black lines. Nikkei 225, Daily, Semi-log On the Nikkei we had a positive bias but refrained from turning outright bullish unless the 13570 level was cleared, black line. The graph shows how this line has now been breached. Of interest is how the day of this break the market gapped higher, breakaway gaps of this nature are often useful when they occur over major levels of this type. So the market trading above the 38.2% retracement period, above the 13570 level, and gapping higher suggests traders will be keen to buy the market here using the 13570 level, or gap area, to trigger stops. Nikkei 225, Quarterly Enclosed above is a quarterly graph on the Nikkei. We include this for those readers who may 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. This graph also details the spectacular percentage gains posted by the index over the past 12 months, moving from 8,000 to 15,000, pulling the index up through the upper end of the long term bearish trading channel, and also opening up its 2007 highs, horizontal red line. CFD Sales/Traders 0044 (0) 207 894 8883 cfdsales@cantor.com Equity Spread Bet Sales 0044 (0) 207 894 8800 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. Unsubscribing From E-mails If you would like to be removed from all Cantor Capital Commentary notes then please click on the ‘Update Preferences’ link on the header, or the ‘Edit your subscription’ link on the footer and select the ‘Unsubscribe’ link at the bottom of this page that appears. This will remove your email from all Cantor Capital Commentary distribution lists. Regulatory Disclaimer This market commentary note (“note”) has been issued by Cantor Fitzgerald Europe (“CFE”), which is authorised and regulated by the Financial Conduct Authority (“FCA”). Cantor Index is a trading name of CFE. This note is defined by the FCA as a marketing communication. This note has been prepared and distributed for information purposes only and represents the personal views and opinions of the sender. This note is not “investment research”, a “research recommendation” or a product of the Research Department. Please be aware that the CFE Research Department may issue a formal recommendation and target price on the stocks mentioned, which may differ from the opinion given here.  This note may contain information obtained by CFE from third parties; the source of information will usually be disclosed.  CFE makes no representation and gives no warranty as to the accuracy or completeness of the contents of this note. Any person placing reliance upon this note does so at their own risk. Investors should consider this note as only a single factor in making their investment decision. The investment discussed in this note may be unsuitable for investors depending on their specific investment objectives and financial position. CFE, its officers, employees and affiliates shall not be liable to any person in any way whatsoever for any losses, costs or claims howsoever arising from any inaccuracies or omissions in this note or any reliance on this note. The recipient is strongly recommended to see independent legal, tax and financial advice. Past performance is not necessarily a guide to future performance. Income from investments may fluctuate. The price or value of the investments to which this note relates; either directly or indirectly, may fall or rise against the interest of investors. This note should not be considered to be a solicitation nor an offer of advice for the purposes of the sale or purchase of any security, investment or derivative.  The information contained in this note is not intended to form the basis of any investment decision and should not be considered a recommendation by CFE or any other person in relation to any of the companies, stock, commodities, currencies or other markets mentioned / referred to in this note. All the information contained herein is based upon information available to the public and has been obtained from sources believed to be reliable. However, the information contained in this note has not been verified by CFE and CFE undertakes no obligation to provide recipients of this note with any additional information or any update to or correction of the information contained in this note. This note is provided by CFE and may be forwarded unamended and in its entirety. This note may not be used in whole or in part to create any other work. All rights reserved. FTSE International Limited (“FTSE”) © FTSE [2013]. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. All rights in the FTSE indices and / or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and / or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent. CFE is authorised and regulated by the FCA under Firm Reference Number 149380. CFE – The Financial Services Register Information: http://www.fsa.gov.uk/register/firmBasicDetails.do?sid=61341 Registered in England No. 02505767 Registered Address: 17 Crosswall, London, EC3N 2LB Risk Warning Trading CFDs carries a high level of risk to your capital and is not suitable for all customers. Furthermore, margined products use leverage to increase the level of exposure to the product, and as a result your losses may substantially exceed your initial deposit and require you to make additional deposits at short notice. Prior to trading leveraged CFDs, you should carefully consider your investment objectives, experience and risk appetite and should not invest money that you cannot afford to lose. Spread Bets are leveraged products placing your capital at risk. Losses can quickly exceed your initial deposit and thus require you to make additional deposits at short notice to maintain your positions. Leveraged products are not suitable for all customers. Please ensure you understand the risks involved before opening an account. You should ensure you fully understand the risks and seek independent financial advice if in doubt. CFE provides an execution only service and does not offer investment advice. These products are not intended for people under the age of 18 or for US residents. The distribution of this note in other jurisdictions may be restricted by law and persons into whose possession this note comes should inform themselves about and observe any such restrictions. By accepting this note you agree to be bound by the foregoing instructions.