FTSE 100: The Multi-Month Bearish Trend Has Slowed, But Is It Over?

Talking Points

• It’s almost one year ago that the FTSE 100 peaked, with the weakest sectors since then having been commodity related and financials. It’s also these sectors which are responsible for the bulk of the gains since the FTSE 100 bounced from its February low.
• While the momentum of this downtrend has been dented, the FTSE is still trading below key levels such as the January 28 high of 6324.

It has almost been a year since the FTSE 100 peaked at 7128 on April 4, 2015. The index has since then given up 970 points or 13% from that high, with the only exception being that of February 5, whereby the index was down by 22.9% from its 2015 high.

The drag on the index over the last 12 months has been from the Oil & Gas, Basic Materials and Financial Sectors with the total median share-return in these sectors over the same period lying at -10.28%, -22.15%, and -10.01% respectively.

The decline in the first two sectors is not surprising given the strong declines in commodities since last year. It’s also not surprising to see these two sectors on top given that commodities bounced over this last month.

The total return for the median share in the Basic Materials sector lies at +14.68%, while Oil & Gas is higher over the last four weeks by +11.49%.

The Bearish Momentum Has Slowed

The stabilization in commodities appears also to have stabilized the FTSE 100 and dented the overall bearish momentum.

Price is now trading above its downward slopping trend-line originating from the 2015 high. However, this is not enough to end the downtrend and a break to the December 28 high of 6324 may be needed before any bearish momentum dissipates.

At this stage the bearish trend is very much present and the FTSE 100 may reach the psychological level of 5750 followed by the current yearly low of 5494.50. For this scenario to form a short-term bullish trend we may need to see some reversal in the current setup. The current trend-defining level is the ECB rate meeting low of 6002. Failure to break this low may generate further gains over the coming days ahead.

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FTSE 100 | FXCM: UK100

Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano

--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com

Contact and follow Alejandro on Twitter: @AlexFX00

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original source

By: Alejandro Zambrano, Market Analyst