FTSE-100: Bullish Traders Are Buying At A Support Level

2015-11-03 08:18:00

Alejandro Zambrano, Market Analyst

The overall trend remains sluggish and the FTSE 100 lacks momentum. With this in mind, we don’t have a strong view. Price is trapped within the 6255-6487 range, and a breakout is needed before we take a view on the price. Bullish traders will argue that the FTSE 100 needs to catch up with the DAX so traders will probably be buying dips in the 6255-6350 range with expectations of the index reaching the October 23 high of 6487.

Traders looking for momentum will wait for a break to the 6255-6487 range, with a breach of the upper limit probably triggering a rally towards the psychological level of 6600. If we breach the lower end of the 6255-6487 range, we may reach 6182 level. This is a 50% correction to the bullish leg from the September low of 5872 to 6487 high. Please see the chart below showing the 50% and 61.8% correction levels.

U.K. Construction PMI is on tap this morning and is expected to have slid to 58.8 from 59.9 in September, according to a Bloomberg News survey, yet this indicator tends to primarily influence the currency exchange rate. In the U.S., factory orders are expected to decline by -0.9% MoM, in general this is more relevant to the stock market.

Long-term Drivers Are Improving

Yesterday’s U.S. ISM Mfg. did not slip lower as anticipated and I see a short-term low in the ISM by December. An increase in ‘New orders’, whilst a decline in 'Consumers’ inventories' suggests that the ISM may be stabilizing. China Caixin PMI looks also to have ended its downtrend and some economists are forecasting higher PMI readings over the next few months. We stress that both indicators are still soft, but the data does suggest that the worst may be over for now. This is supportive when looking at the long-term stock market trend.

Upcoming Risk Events (GMT)