The FTSE100 recovered sharply alongside European indices and head towards its current yearly high as fears over the new Omicron variant started to subside as experts from South Africa reported no deaths from the new strain.
Bulls may be taking aim at the 7,500 level this week according to technical analysis, however, investors have two risk events to watch, which are the FED and BoE interest decisions.
Expectations of the BoE hiking this week are already under 50 percent. Markets may be more concerned about the pace of QE tapering from the FED, which is likely to be larger than the last meetings taper.
The FTSE100 stalled around the highs of last after UK GDP showed a very muted 0.1 percent monthly increase in growth. The prior reading was 0.6 percent, which would hint that growth is slowing.
Overall, it is impressive how the FTSE100 bounced back last week as Omicron fears looked overdone and exaggerated alongside the latest break under 7,000 in the leading UK index.
I suspect that the FTSE100 could trade much higher if we get some positive news from the USA and UK economies, although tapering QE has traditionally been a drag on stocks, alongside rate hikes, which is bearish for stocks.
Sentiment towards the UK100 is also looking good for bulls. According to the ActivTrader platform some 68 percent of traders are bearish towards the UK100. This could be extremely bullish for the UK100, given that retail traders tend to lean against the overall trend, and are known to run counter to the prevailing market trend.
UK100 Short-Term Technical Analysis
The four-hour time frame shows that the FTSE100 fell towards the bottom of an extremely large ascending wedge pattern last week, bulls now look to be targeting towards the top of the pattern.
It should be noted that the top of the pattern sits around the 7,500 level. If the top holds then a massive 500 points reversal could take place, or indeed a bullish break could be a bullish breakout with 500 points if upside potential.
UK100 Medium-Term Technical Analysis
The daily time frame show that the UK100 is still trapped inside a large rising price channel. The FTSE100 has been trapped inside the pattern for well over a year now.
Due to the fact that the channel is inclining the bullish target for the index continues to increase. At present the top side of this typically bearish pattern is located around the 7,700 level.