Technical Analysis - FTSE 100, 4th November

Monday, November 4, 2013, Marketing Communication FTSE 100, Daily, Semi-log The FTSE has posted a strong move higher in recent days, pushing up to post fresh H2 highs. Unlike the S&P 500 however it is yet to post fresh 2013 highs, and remains well under its all time highs posted back in 1999. Candle followers will note the Evening Star pattern formed on Friday, yellow square. This pattern often signals a near term market top. This coincides with the stochastic turning lower, so there are some arguments that the strong trend in place from the October lows is waning. Price remains dominant however and until price action breaks the lows of the Evening Start pattern the risk reward is not that favourable. Traders having opened short positions on this pattern are likely to have used the highs of last week at 6820 as stop levels. Due to the strong underlying medium term trend buyers are seen entering the market on any profit taking that was to emerge. So while the FTSE 100 does look vulnerable to some short term profit taking in the coming days, shorts should only be for the active. The more straightforward play is to wait for any profit taking to emerge and buy on the weakness expecting the Q4 rally to continue through to year end. FTSE 100, Weekly, Semi-log Last updated, October 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 5 wave impulse move higher, red 1-5, followed by a simple expanded flat abc correction. From the 2011 lows the FTSE has posted a new impulse wave higher. Indicating the FTSE 100 is preparing a more sustained move up to fresh all time highs above 7,000. A general guideline in Elliott Wave analysis is that Wave 5 often relates to Wave 1, particularly when Wave 3 is larger than Wave 1, as in this case. Projecting the height of Wave 1 onto the lows of Wave 4 gives a medium term upside target on the FTSE around 7,220. These highs would allow the FTSE to match the positivity posted in the US markets and post new all time highs. This optimistic outlook remains while the 6,000 support holds. S&P 500, Daily, Semi-log The S&P 500, like the FTSE is showing signs of being over extended in the near term, however the moves from December and February detail how this condition can remain in place for some time. The red converging lines highlight a potential bearish rising wedge, indicating that while buying interest has continued to improve, each peak has attract more considerable selling pressure. This pattern is only confirmed by the price action breaking the lower diagonal support line, on such a break the resultant selloff can be rapid. While the price action does appear vulnerable to some profit taking the outlook is not favourable to short sellers due to the strong underlying trend. Leaving a buy on weakness stance seen for the index in the days ahead, profit taking seen only for the more active, with breaks under the October lows at 1646 required to turn more negative. FTSE 100, S&P 500 Overlay Graph This overlay graph details the clear out-performance over the past year of S&P 500, black line, over the FTSE 100, blue line. As the S&P 500 has moved up to fresh all time highs, while the FTSE is yet to post a fresh high in 2013. However some of the near term under performance in the FTSE has unwound as the FTSE has posted a strong move from the October lows. CFD Sales/Traders 0044 (0) 207 894 8883 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.