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The FTSE 100 share index has tested back towards the 7,900 level as the index sweeps aside fear about the Fed rate hike next month and stubborn inflation in the United Kingdom.
Instead, traders and investors are choosing to focus on UK growth and also better data. Last week the S&P Global/CIPS UK Services PMI increased to 54.9 in April 2023, the highest in a year and well above market consensus of 52.9, a preliminary estimate showed.
New order growth hit a 13-month high, with export sales increasing at a solid pace, amid rising spending on travel, leisure and entertainment. In addition, the rate of job creation strengthened in April.
The S&P Global/CIPS UK Services PMI (Purchasing Managers’ Index) is based on data collected from companies in the transport and communication sector, financial intermediation, business services, personal services, computing and IT, hotels, and restaurants.
The index tracks variables such as sales, employment, inventories and prices. A reading above 50 indicates that the services sector is generally expanding; below 50 indicates that it is generally declining.
Now that we have seen the 7,900-level tested I believe an up move is imminent, following the short-lived dip to 7,200. A move towards 8,000 level this month could be a great chance to accumulate the UK100 for a huge breakout towards the 8,500 level in Q2.
Sentiment remains bearish, which could be good for further price gains ahead for the UK100. With retail looking to go short we could see the FTSE100 heading higher towards the 8,000 level.
If we look at the ActivTrader Market Sentiment tool, 94 percent of traders are currently bearish. This metric has increased by 20 percent since last week, meaning more gains are still likely.
Based on the current sentiment reading it is highly probable that we could see a new all-time high, which should be a concern for shorts right now.
UK100 Short-Term Technical Analysis
According to the four-hour time frame the UK100 is close to forming a bullish inverted head and shoulders pattern, with the neckline of the pattern confirmed if the price reaches 8,000.
This should be a concern for bears, the bounce from 7,600 area this month should be an encouraging sign for accumulators who took advantage of a final chance at buying close to the 7,200-support zone.
UK100 Medium-Term Technical Analysis
The daily time frame shows that the UK100 has reversed higher, however, the overall price trend still remains bullish and a large doji style reversal candle has formed and proven to be bullish.
If we see the UK100 starting to move towards the 8,000-resistance level, which could certainly hint that a massive move could take place to the 8,800 area.
