The FTSE 100 has continued its recovery from last month’s lows, with the gains supported by blue-chip companies as trading resumed after a long holiday weekend to mark Queen Elizabeth’s Platinum Jubilee.
Markets are unfazed by the political happenings at Westminster over the last few days as they correctly believed that Boris Johnson would survive, which has created a vast ocean of green on the index.
The large miners have been driven by a recovery in the sector, with Rio Tino and Glencore gains, due to a rise in copper price. Saudi Arabia has also had a hand in the recovery in the petroleum majors in the UK100.
Saudi Arabia announced a major hiked prices for its crude sales in July. BP and Shell have posted big gains on the back of this announcement. So the UK100 commodity related companies have been lifting the index this week.
In the year so far, the FTSE 100 has had its ups and downs, but it has performed better than other global index’s, in general, due to surging oil and metal prices. It has outperformed the midcap FTSE 250, which has taken a hit due to fear of inflation and an economic slowdown.
It should be noted that the extremely weak British pound could give the manufacturing sector a boost, however, this is really on against the US dollar, although the pound is quite weak against the euro historically.
Sentiment towards the UK100 is also bearish right now. According to the ActivTrader platform over 74 percent of traders are bearish towards the UK100. This is signalling more gains ahead.
Typically, the retail crowd is on the wrong side of the trade more often than not, so the UK100 could continue to rise this week and month, which the price action and chart certainly suggests is possible.
UK100 Short-Term Technical Analysis
The four-hour time frame shows that the UK100 index has made a decent amount of progress towards the 7,640 level. The index has been well-supported above its 20-day MA.
However, we do have the Fed and BoE decisions over the next seven-days, so we should be braced for some volatility here with the index as we could see some range trading coming.
UK100 Medium-Term Technical Analysis
The daily time frame shows that a large, inverted head and shoulders pattern has clearly formed. The pattern will be confirmed if we see the FTSE100 moving back towards the best levels of the year 2018.
If the pattern is activated, I expect that the FTSE100 could even reach 9,000 or even 10,000, however, bulls really need to get past the all-time high first, close to the 7,900 level.