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The FTSE100 has rallied above the 7,300 level as more certainty towards the UK political situation started to take shape, causing sentiment towards UK stocks and risk-on assets to improve.
After falling to a fresh yearly low of 6707.62 earlier last month, a sudden bid tone from bulls allowed prices to rebound back above a level that remains as critical support at 7,000.
With this zone assisting in limiting the downside move since May of last year, we probably now need to see the FTSE100 getting above the 7,500 level to really turbocharge the recovery.
Gilts have also started drop, which again hints that markets are starting to have more confidence in the United Kingdom Government, following months of disastrous Conservative Party errors.
Sentiment has turned bearish again, which could suggest further price gains ahead for the UK100. I think the market is looking for an even stronger reversal down the road. Much will depend on the midterms.
In an ideal world sentiment should be heading in the opposite direction of the trade. This is because retail traders are normally on the wrong side of the trade, and especially price trends.
Based on the current sentiment reading I think it is highly probable that we could see the upside starting to gain momentum. However, I remain long-term bearish towards the UK economy.
UK100 Short-Term Technical Analysis
According to the four-hour time frame the UK100 is close to ignited notable inverted head and shoulders pattern. I think we have not seen part the target reached, so more upsides do make sense.
The size of the pattern implies that we are about to see a move to upside of over 400 points if we start to break the 7,400 level. I would suggest keeping a close watch on the 7,500 level.
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UK100 Medium-Term Technical Analysis
The daily time frame shows that a large wedge-shaped pattern is in play. The UK100 has also moved to test its key 200-day moving average, meaning the trend is still unclear.
If we see the UK100 staying below the 7,330 level, which is a key market pivot, I would suggest that we could easily start to see the UK100 trading towards the 7,500-price area again if the 200-day cracks.
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