UK100 – 6,000 a Huge Hurdle

Stock markets have been on a good run since late March, with the FTSE bouncing back around 20% from its lows to within a whisker of 6,000.

UK100 (FTSE 100) Daily Chart

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The rally looked to be running out of steam around 5,800 but a late surge on Thursday, backed by momentum, quickly changed that. Unfortunately though, we’ve since seen a bearish engulfing pattern on the 4-hour chart which begs the question, is 6,000 a step too far? Is there really good reason to be this optimistic as we head into the most horrific earnings season in years, probably decades?

UK100 (FTSE 100) 4-Hour Chart

The momentum indicators will be key for me here but a break would send a strong signal and suddenly 6,200 doesn’t look too far away, where it found resistance last just over a month ago.

The big level above here though is 6,500. That may be a step too far at this stage, although a lot of bad news seems to be priced in – based on the free pass the horrible data we’re seeing is getting – and there is an unprecedented amount of stimulus floating around this system. The usual rules may not apply. Earnings season will be the true test of this.

A break below the rising trend line (granted – only two touches, but useful none-the-less) may signal that some profit taking has kicked in and patience is needed. If so, that’s fine, it’s been an impressive rally under these extreme circumstances.

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.