The FTSE100 has moved to its highest trading level since June last year as traders remain wholesale short towards the leading United Kingdom index in increasing numbers.
Despite the weak fundamental, the recent speak by new UK Prime Minister Rishi Sunak appears to have soothed investors, following the disastrous tenure of former PM Liz Truss.
Usually, the UK100 shares an inverse price correlation with sterling. However, this is not entirely true recently as the correlation has broken somewhat as the US dollar stumbles and sterling heads higher, so has the UK100.
It is also noteworthy that the technical picture looks to be short-term and medium-term bullish as traders test towards a 1-year trendline, which was briefly broken yesterday. More on this later as we now move towards current sentiment metrics.
Sentiment remains extremely bearish, which could be great for further price gains ahead for the UK100. With retail looking to short we could see the FTSE100 holding above the 7,600 level.
If we look at the ActivTrader Market Sentiment tool, 91 percent of traders are currently bearish. This metric has risen by over 15 percent since last week.
However, this sentiment bias does look very overstretched. In such instance a correction lower is also possible, although equally the short squeeze could just continue.
Based on the current sentiment reading I think it is highly probable that we could see the upside starting to accelerate.
UK100 Short-Term Technical Analysis
According to the four-hour time frame the UK100 has started to trade towards the very top end of its range, and also it has formed a bullish pattern with a 300 point upside projection.
With the bullish inverted head and shoulders pattern that formed, I would suggest keeping a close watch on the 7,600 level for incoming gains to activate the price pattern.
UK100 Medium-Term Technical Analysis
The daily time frame shows that the UK100 is nearly clear of resistance and a move towards the 7,600 level would now help activated inverse head and shoulders pattern.
If we see the UK100 starting to break trendline resistance, then move towards the 7,700 to 7,800 area then the all-time is within touching distance. All eyes will be on a huge break next year.