FTSE 100 forecast - daily chart 5th November 2010
The FTSE 100 index surged higher yesterday, following the overnight news from the FED which came too late for European markets, but which duly provided the catalyst for a breakout from the recent sideways trading range created as a result of the rumour and speculation around the FED’s intentions, as traders and investors waited for this key announcement. Of the two major indices, the Dow Jones had in fact given us stronger signals than the FTSE 100 that the breakout, when it came, would be to the up side, with Wall Street holding above both the 9 and 14 day moving averages throughout this period of sideways price action. The FTSE 100 in fact broke below the two short term moving averages recently, but gave us a strong signal on Tuesday that the bullish momentum had been fully reinstated as the index broke and held above all four moving averages once more.
Yesterday’s perfect wide spread up candle saw the London index close sharply higher, ending the trading session 113.82 points higher on the day or 1.98%, and breaking above the recent sideways consolidation, which now provides an excellent platform of support for the move higher. As such, we can now expect a strong bull run towards the end of the year as the technical and fundamental elements combine to provide a positive framework for equities, with the traditional Santa Claus rally appearing to have started early this year! The moving averages remain firmly supportive, with both the 9 and 14 day moving averages now turning higher once again, and with the 40 day and 200 day moving averages providing a positive longer term outlook, the picture is firmly bullish. Yesterday’s break and hold above the key 5,833 price point of mid April was significant, as this now provides a further platform of support in the move higher. My year end forecast for the FTSE 100 index was originally around the 6,000 price level, but given the broad fundamental picture which is now supportive for equities, coupled with the strong technical picture, we can now expect to see this level comfortably breached, with a possible close around the 6,250 region, and a subsequent test of the high of late 2007 at 6,751.70 in the first quarter of 2011.
My Dow Jones daily analysis of the US markets confirms this view, with the trading volumes last night giving us further clues for the longer term, and you can read my forecast by following the link here.
