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FTSE 100: Has The Trend Really Turned Bullish?

FTSE 100: Has The Trend Really Turned Bullish?

Alejandro Zambrano, Market Analyst

The FTSE 100 moves lower this morning as short-term traders book gains on long positions held from last week, with some positioning themselves for a return to the bearish trend. Dallas Fed Manufacturing index is on tap today and a Bloomberg poll projects an outcome of -14 from -20.1 in December. A lower than expected outcome may spur a bearish sentiment and earlier today, the German IFO Expectations Index declined to 102.4 from 104.1, which is mildly FTSE 100 bearish.

Boost on ECB, But Has The Trend Really Turned Bullish?

Last week, the FTSE rallied as the ECB hinted at a potential rate cut at their next policy meeting, possibly due to being oversold based on technical indicators, and traders speculating on more BoJ QE at this week’s rate meeting.

The next step for markets is probably to test how bullish the market truly is. If last week’s low of 5600 holds as support then this may be the base for further gains over the coming weeks ahead.

Short-term Bearish Below 5944

In the short-term, the trend is bearish below this week’s high of 5944 and the index may drift to the 5700 to 5800 range. In this range, I would expect traders to opt for long positions, as the risk/reward ratio is favorable if the weekly low of 5600 indeed holds. The alternative scenario is a break to this week’s high of 5944. In this scenario the FTSE 100 may reach the next resistance level which is the January 13 high of 6010.

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FTSE 100 | FXCM: UK100

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Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano

--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com

Contact and follow Alejandro on Twitter: @AlexFX00

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