FTSE 100 - Technical Analysis

Tuesday, August 27, 2013, Marketing Communication FTSE 100, Daily, Semi-log For much of 2013 the FTSE mirrored the moves seen on S&P 500. However the sell-off in June posted some significant divergences. The S&P chart below details how the US index only retraced 38.2% of the previous bullish trend. The graph above details how the FTSE in comparison moved down to the 61.8% level. Following rally from the June lows the FTSE has found resistance from the previous trading range support, red region, while the S&P 500 moved on to post fresh all time highs. In recent days the FTSE has moved to the 38.2% retracement level. For the bulls it is important that the 6390 support holds, as a move under the 38.2% level would suggest a move down to the 50% area was on the cards, and potentially even a retest of the June lows. The Nikkei graph below is also currently on pivotal near term support, giving a trading buy bias overall in the near term, albeit with tight stops as the level of confidence on the UK and Japanese markets lags behind the US. FTSE 100, Weekly, Semi-log 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 psychologically important level at 6,000. 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. On the graph above we have also highlighted an RSI Failure Swing, Black lines, where the recent fresh highs, have not been matched by higher highs in RSI. This does suggest that the strength of buying earlier in the year was not as robust as we would like. This does flag up some more medium term risks that could see the FTSE drop down to its medium term trend later in Q3, red diagonal line. So in June the FTSE dropped down towards some major support areas, and bullish trend lines, which attracted buying interest from the longer term players. Moves under the 6,000 area would start to create more serious downside concerns, while with the recent leg higher, off this pivotal support, has to date confirmed the optimistic count. FTSE 100, Monthly, Semi-log Text last updated, July, 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 has 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. S&P 500 Graph, Weekly The Weekly graph above details how the S&P 500 has posted record all time highs on the recent moves, setting a bullish backdrop for the European markets. However we can see the RSI Divergence, black lines, indicating that the breadth of the market was not behind this move. This does not have to be a major bearish signal, it can merely indicate a period of consolidation ahead. The S&P has posted an extremely positive move from the 2009 lows, and then accelerated further in 2013. There is room for a more substantial consolidation period. But while these longer term trend lines holds the current positive trends look set to continue. S&P 500, Daily, Semi-log The S&P has continued its recent trend of remaining as the most bullish of the indices covered as the broad US index posted fresh all time highs in July, considerably ahead of moves posted on the FTSE and Nikkei. In May the index broke out of the strong H1 trend, red region, on the first talk of Fed QE tapering. The sell-off found support from the 38.2% retracement level and interestingly the RSI never moved to absolute oversold levels. RSI is ideally a non trending indicator, for trending graphs the overbought/oversold regions need to be adjusted upwards/downwards rather like birds migrating north/south during the winter/summer. The RSI 35-40 area has acted as support on the positively trending S&P 500 on the previous minor corrections. While the RSI stays above the 35 area the outlook remains positive, and we can see traders seeing the current minor weakness as another buying opportunity. Nikkei 225, Daily, Semi-log The Nikkei broke its strong H1 trend in June dropping down towards the 50% retracement level shown, red lines. From this break it seems to have found resistance from the previous H1 trend support. Following the highs in July the index has moved down to the previous support, (13,592) black line, and the 38.2% retracement level support (13,145). The RSI from the lows in June has been attempting to post a positive trend. The strong acceleration higher from November last year has been corrected, as yet however the technical indications are that this was a correction, rather than a full trend reversal, leaving an optimistic  outlook while the RSI trend and the near term support holds. On a break of RSI and near term support the next level of major support would be seen at 12,281, the 50% retracement level. CFD Sales/Traders 0044 (0) 207 894 8883 cfdsales@cantor.com Equity Spread Bet Sales 0044 (0) 207 894 8800 sales@cantorcapital.com Images Depending on your email settings the images contained in this note may not be downloaded correctly. Select the view 'Web version' link on the header to open a browser window that will display the full note. Graph images are created on Bloomberg, and remain under copyright to Bloomberg. 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.