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The FTSE100 has so far had a mixed start to the month of June, as the index trades in mildly positive territory on a monthly basis but continues to trade in a tepid price range above the psychological 7,000 level.
Bearish news surrounding new UK travel restrictions to other countries has caused travel stocks inside the FTSE100 to turn lower at the start of this week. However, bullish news surrounding strong monthly UK housing price increases have boosted home builder stocks.
Conflicting news surrounding the United Kingdom economy is one of the reasons why the FTSE100 is struggling to rally above the 7,000 level. Markets remain extremely uncertain towards the UK economy, as Boris Johnson’s ruling Conservative party government are unable to confirm when COVID-19 restriction will be completely lifted.
Next week’s FOMC interest rate decision from the US central bank could be another big reason why the FTSE100 is struggling to rally. The FED’s take on QE and rates will play a big part in how the FTSE100 index performs in June.
Should we see the central bank continuing its QE program and committing to lower interest rates then it is more likely than not that the FTSE100 will continue to head higher, as QE from the US is bullish for stocks.
Worryingly, if the US central bank decide to taper or hint at tapering then the FTSE100 could turn sharply lower as global stocks will more than likely go into meltdown mode. Again, this could be a reason why the FTSE100 is struggling to rally right now.
FTSE100 Sentiment Analysis
The Market Sentiment indicator on the ActivTrader platform currently shows that some 65 percent of traders are bullish towards the FTSE100 right now. This could indicate that the FTSE100 could be about to reverse lower, as the retail crowd is typically wrong about the direction of the market.
In order for the index to start break out its range, and take out the yearly trading high, we probably need see bearish sentiment towards the UK100 return. The current sentiment suggests it may be hard for the index to break above the 7,170 level in the near-term.
FTSE100 Technical Analysis
The four-hour time frame shows that the FTSE100 is trading inside a large broadening wedge pattern in the short-term. We should therfore expect range bound trading conditions while the index is trapped inside the wedge.
According to the overall size of the typically neutral price pattern, the index is likely to trade between the 6,750 and 7,200 levels in the short-term.
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Higher time frame analysis shows that an extremely head and shoulders pattern has been invalidated after bulls rallied the index above the 6,950 level.
According to size of invalidated the bearish pattern an upside price advancement of close to 800 points in the UK100 should be expected, which could take the FTSE100 towards the 7,700 resistance level over the medium to long-term.
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