FTSE 100 - daily chart 5th October 2010
A strong performance from the FTSE 100 yesterday, as London’s leading index closed the trading session with a wide spread up candle, which broke and held above the 9 day and 14 day moving averages once again, but just failed to clear the high of Thursday at 5,650.33. Nevertheless, Tuesday’s price action has cleared potential resistance at 5,630, creating a solid platform of support, which should now provide a further leg up in the current rally, as we head towards the high of April at 5,832. A break and hold at this level will then open the way for a move towards the 6,000 level, which is our short term target for the FTSE 100, and one that we should see in the next few weeks.
Overnight, Wall Street surged higher, on better than expected data and the start of the Q4 earnings season, with several blue chip companies reporting solid earnings, and as such, ending the US session with a wide spread up candle, which much like London, just failed to breach the high of Thursday. The break above all four moving averages, coupled with a breach of the short term resistance in the 10,880 level, has now created a strongly bullish technical picture for the DOW 30 index, and we can now expect to see a test of the 11,258 high of early April in the short to medium term. With the 40 day moving average now closing on the 200 day moving average, this will add a further bullish signal to the picture if confimed later in the week.
DOW 30 - daily chart 5th October 2010
The only cautionary note to last night’s trading session is the volume, which was modest, and as such I would have expected to see this well above the average for such a move in the index, which may be a hint that the move higher may run out of steam in the short term. However, as we have seen no evidence of professional money selling in last week’s price action, we can assume for the time being, that the move is genuine, but this could be an early warning signal of a reversal in due course – time will tell, as will our volume spread analysis!
