Daily FTSE Technical Update |
By, James A. Hyerczyk
The FTSE 100 index rallied with a vengeance on Friday. Although the index closed lower for the week, the solid finish put the market in a position to continue the move this week. The question that traders have to be asking is whether this index has the buying power and upside momentum to accomplish the task. The price action was strong but the volume was weak, once again indicating that short-covering rather than strong buying may have been driving the market late in the week. Friday’s volume was a little more than half of the 1.6 billion share move on November 30.
Technically, last week the FTSE had what can best be described as volatile, two-sided trading sessions. When the dust settled finally, the market had produced a higher-higher than the previous week, but a lower close. At times consecutive sideways days made it appear that a bearish distributive top was taking place. This proved to be true on Thursday, however, by Friday the story changed as sentiment shifted to the upside. With the holidays approaching, this week could be the week where traders make the decision to drive this market higher into the end of the year with a so-called “Santa Claus Rally” or resume the downtrend which has been the theme for most of the year.
As we near the mid-point of the month, traders should pay particular attention to two levels. The first level is the 50% price level or monthly pivot price. This price is 5536.40. Friday’s close was below this price, giving it a slightly bearish bias. Regaining and re-establishing support at this level will indicate a possible end-of-the-month rally. In addition to the pivot price, last year’s close at 5899.90 is also an important upside target. Traders may try to drive this market into this level to push the market higher for the month. If neither of these prices is challenged then look for the FTSE to re-establish its downtrend.
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