What’s inside:
- FTSE 100 snaps win streak
- High (so far) comes at top-side confluence of trend-lines
- Looking for the market to soften a bit here, consolidation period at the least
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After fourteen consecutive sessions of gains for the FTSE 100, the index started the week as a loser, and we’re seeing some minor selling in the early part of today’s session. It’s been an incredible run, with most of those positive days coming in record territory; even setting a record for number of consecutive record closes at twelve. Sterling weakness since ‘Brexit’ has been a huge tailwind for the market; it also doesn’t hurt that the tides of general risk appetite have lifted all boats, too, as major global stock markets have done well during the same period. That hasn’t been the case recently, though, given the FTSE’s continuous rise while other markets – Nikkei 225, DAX & S&P 500 – soften up.
We suspect that while it’s been less than two days, it’s the UK index’s turn to soften up here. Yesterday marked the first down day in nearly three weeks, but more importantly the turn lower came at an important long-term top-side trend-line spanning from the top in 2013 over the 2015 highs. The decline also comes from just above the Oct ‘15/ Oct ’16 top-side trend-line we’ve been discussing for the past week or so. Given the two lines are about 35 points in proximity, we’ll call it confluence of top-side resistance.
One of the signposts we have been looking for to identify a break in momentum – a daily close below the prior day low. More specifically, a close below the last bullish day; which in this case, would be a close below the low on 1/13 of 7292.
Even without that close below the 1/13 low today, we expect the market to weaken here a bit. There isn’t an expectation that the FTSE will necessarily fall apart, but a pullback/consolidation phase is overdue at the least. We look for choppy two-way trade to develop, and for the nimble short-term trader this should present opportunities from both sides of the tape.
FTSE 100: Daily
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---Written by Paul Robinson, Market Analyst
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