Footsie Fortunes
THE Dow, Nasdaq and FTSE 250 indices may indeed have slightly bearish technical patterns but there is no ignoring the resilience of our large cap index - the FTSE 100.
We all - that's all of us and the rest of the world - know that the FTSE 100 index has been trading beautifully within a bull channel for the past year. The trading opportunities have been plentiful. The recent surge in oil prices has kept the Footsie index in the bottom half of the channel and above the key long-term support, at around the 4,400 to 4,415 area. This support level has been tested several times over the last week and has held every time.
Opec announced on Wednesday that the oil nations will increase output by some 8% - the biggest increase since 1997. This extra supply of the black gold caused oil prices to fall off from the highs of over $42 a barrel to under $39.
The fall in oil prices will undoubtedly lift the world indices and the FTSE 100 is perfectly poised and technically underpinned.
The target levels are initially the mid-channel point at 4,530, then the highs of a few weeks ago at 4,600 and finally the medium-term objective at 4,680, which is a Fibonacci retracement level for the whole bear market move down from 6,950 in December 1999 to 3,280 in March 2003.
However, be aware of the significance of the major support levels at around 4,400 to 4,415 points. Should the market break significantly below these levels then we will enter a bear phase towards the psychological level of 4,400.
Footsie Fortunes is written by Simon Brown of Quantigma - a firm specialising in tools for technical analysis. It is regulated by the Financial Services Authority. For information about courses in technical analysis, go to Quantigma.com or its sister company easy2spreadbet.com.
