FTSE 100 FUNDAMENTALS

It’s been another week of heightened systemic risk that has kept UK equities at bay. With the recent FTSE 100 rally coming to a halt.

With a double-digit inflation print and labor strikes, the probability of an unavoidable recession has risen sharply. For the British Pound, the employment market is under pressure with real wages posting a historical decline.

As the BoE (Bank of England) continues to monitor the economic backdrop, aggressive rate hikes will likely persist for the remainder of the year.

FTSE 100 TECHNICAL ANALYSIS

In my previous article, I discussed the key levels that have assisted in driving price action into a rangebound state.

Although FTSE bulls have managed to rise above the key psychological level of 7,500, Fibonacci levels have formed a zone of confluency, capping the upward move.

Following the formation of a golden cross (the 50-day MA crosses above the 200-day MA) on the daily chart last month, prices continued to decline before rebounding off another big level at 7,000.

Since then, the FTSE has recovered a large portion of June’s losses with 7,553 remaining as resistance. Meanwhile, the monthly CCI (commodity channel index) is pointing higher while the daily CCI attempts to exit overbought territory.

FTSE 100 Daily Chart

Chart prepared by Tammy Da Costa using TradingView

From a short-term perspective, the hourly chart further illustrates the support and resistance levels that currently remain between the 23.6% and 14.4% retracement of the June move.

FTSE 100 Hourly Chart

Chart prepared by Tammy Da Costa using TradingView

UK 100 BIGGEST MOVERS

In today’s trading session, the energy sector has lead gains with a 1.64% move higher, closely followed by a 1.48% rise in real estate. The remaining sectors have remained relatively stable resulting in a slight increase in the overall index.

(Click on image to enlarge)

Source: Refinitiv

FTSE 100 SENTIMENT

FTSE 100: At the time of writing, retail trader data shows 27.34% of traders are net-long with the ratio of traders short to long at 2.66 to 1. The number of traders net-long is 10.34% higher than yesterday and 2.38% lower from last week, while the number of traders net-short is 3.99% lower than yesterday and 2.87% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests FTSE 100 prices may continue to rise.

Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed FTSE 100 trading bias.

FTSE 100 KEY LEVELS

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