FTSE 100 Tech Update: Constructively Declining into Support
- After clearing last summer resistance levels the FTSE has fallen back
- The decline has been gradual and viewed constructively at this time
- Old resistance becomes new support
After a period of consolidation during July, the FTSE 100 was able to sprint higher with the help of a more accommodating-than-expected BoE. This pushed the UK index through swing high resistance levels created during June, July, and August of last year.
In recent trade, though, the FTSE has fallen back in gradual fashion, which is typically viewed as bullish after a strong surge higher. The lack of downward momentum indicates a lack of sincerity on the sellers’ part.
The decline has halted thus far around the July 2015 peak (old resistance becomes new support), with the FTSE currently attempting to turn higher. Whether the turn higher is able to result in a leg to new highs or become part of a broader consolidation is yet uncertain. But, the tone at this time is more bull than bear.
Should the FTSE fail on its turn higher from here and fall back a bit further towards the peak from last month it could coincide with a two-month old lower parallel, and as long as the decline does so without strong selling pressure, then that would be our next spot to look for the market to hold before turning higher.
FTSE (UK100) Daily
At this time, we will focus on the FTSE from the long-side, until price action tells it’s better to do elsewise. We will also continue to keep trade size smaller and expectations lowered with in mind the light volume, low volatility period isn’t likely to produce outsized gains.
On the news front, there isn’t anything significant out of the UK until Friday when preliminary Q2 GDP figures will be released at 8:30 GMT time. Analyst are looking for a growth rate of 2.2% YoY and 0.6% QoQ.
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX.
He can be reached via email at firstname.lastname@example.org with any questions or comments.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.