FTSE 100 candle chart for 26th May 2010
Having fallen below the psychological 5,000 price level, the FTSE 100 index has bounced back in trading today, continuing the bullish reversal of yesterday, which saw this threshold breached, despite the sharp sell off in the DOW towards the end of the US trading session. However from a technical perspective the short term outlook remains bearish as we hold below all three short term moving averages, and with deep resistance now waiting above, any sustained rally will require some sustained momentum in order to recover the highs of 5,800 and beyond. In the short term therefore we can expect to see further market volatility as the European and Korean issues dominate, but should we breach the 5,450 level in due course, then this will signal a return to the bullish trend of the last few months, and the possibility of a run towards 5,800 once again.
An analysis of the trading volumes also confirms this view, with current bearish volumes now approximately 50% of those of last week, suggesting that bearish sentiment is reversing as selling pressure declines, all adding to the view that the market sentiment is now turning. Indeed the VIX would also support this idea, as we approach market highs for the fear index, and as a contrarian indicator are now giving us strong buying signals as a result. So in summary, the FTSE 100 looks set to regain much of the lost ground of the last few weeks and we should expect to see FTSE betting markets biased to long positions as a result.
