Footsie takes its eye off the bull

HAVING traded sideways for a few weeks the FTSE 100 is showing some signs of volatility.

Although the long-term trend is undoubtedly 'up', the market is trading within a shorter-term down trend, which has taken the index down towards the 4900 level.

There is some significant technical support between 4900 and 4925, so I would expect the recent move down to possibly bounce back up from the current level.

If this 4900-4925 area does not support the market, there is a potential down-move to 4750, where the major uptrend support lies. But I still believe the recent move down is temporary and the market will be reaching new highs for the year within a few weeks.

False breaks to the downside are common in the Footsie charts, because the media often portrays a strong one-way directional view on the market.

Over the last few weeks that has been bullish. Therefore, traders and investors often all end out going 'long'. Any bearish news - like the ECB announcing this week that interest rates in Europe will rise later on in the year - causes a temporary 'shakeout' of these long positions, then allowing the market to move higher again.

Should the market hold and then rally from here, as I expect, we can expect some resistance at 4990 and then at 5075, which is the year's high from mid-February.

Simon Brown is a director at regulated chart analysis firm Quantigma. For more views on stocks, indices and currencies go to the Quantigma website.