The FTSE100 is similar to many other global indices at the moment after falling from a new multi-month high and becoming trapped in range bound trading conditions with no clear directional bias in place.
Many of the mining companies inside the FTSE100 have been weighed down over inflationary fears and rising costs. Additionally, housebuilders have been dented over fears about a series of coming rate hike, which would dent borrowing costs.
Trading the FTSE100 is therefore difficult at the moment. Whether you believe a return to normal after COVID-19 will help lift all stocks, or whether stagflation will weigh on the FTSE100, neither theory has been proved totally correct.
I suspect that the next big move in the FTSE100 will happen once we get clarity over the FED tapering QE this year. Potentially, we could see more range bound conditions right up to the November FED meeting.
For me, I think that stocks could still get a pop from the US infrastructure bill being announced, and some dovish FED speakers, who may talk down a November taper after two very soft monthly jobs report in September and August.
FTSE100 Sentiment Analysis
The Market Sentiment indicator on the ActivTrader platform currently shows that some 74 percent of traders are bullish towards the FTSE100 right now. This could indicate that the FTSE100 will struggle to trade above the 7,100 level, as the retail crowd, now the majority, is typically wrong about the direction of the market.
In order for the index to move higher and break to a new and higher trading range, we probably need see bearish sentiment towards the UK100 to rise. Overall, the current sentiment suggests more near-term range trading for the FTSE100.
FTSE100 Technical Analysis
The four-hour time frame shows that the FTSE100 has formed an inverted head and shoulders pattern, after bulls defended the 6,900 level last week.
According to the overall size of the bullish price pattern, the index is likely to rally towards the 7,500 level in the short-term if the 7,200 level is broken and the pattern ignited.
Higher time frame analysis is alligning with short-term analysis and is pointing to move gains to close to the alll-time high as the FTSE100 appears to be targeting the top of large rising wedge pattern, around the 7,500 level.