The FTSE 100 hit a new six month high this week and crucially it finished above the 4500 level. Not only that but it finished above the important 4300 - 4500 trading range and also ended the week around 50 points higher than it’s most recent highs. So is it now worth going long on the FTSE 100?

Well on a technical basis the signs are certainly promising but does the current state of the UK economy really justify such a move? There are certainly a few signs of a recovery but I’m not convinced the economic data that we are seeing at the moment justifies a move up towards the 5000 mark just yet.

For me we would need to see much better economic data, particularly on the jobs front, as well as improved earnings results for the major UK companies. Until that happens, I think the 4300 - 4500 trading range is about right.

However on the other hand you could argue that the markets look ahead 18 months so in that respect you could potentially argue a case for a move upwards.

It really is very difficult to call at the moment. The FTSE 100 is making new highs but the EMA (200) is still flat (rather than going upwards) and the price is only marginally above this level at the moment. A significant sign would be if the price could break through the current Supertrend level on the weekly chart. This indicator has been red, ie bearish, since August 2007 but we are now within 30 points of this indicator (which currently stands at 4604.4).

Therefore if we could close above 4604.4 next week then there could be some strong momentum behind any upward move and 5000 could be easily achievable in a very short space of time. However it could just as easily fall back into the 4300 - 4500 trading range. In which case we will be relying on some positive economic data in order to have another crack at this level once more.

 

 

Filed under: Indices

Like this post? Subscribe to my RSS feed and get loads more!