Technical Analysis of FTSE 100
The European equity benchmarks posted large declines on Tuesday, with the FTSE 100 falling 113 points to one-month lows at 5735.75. Having developed a consistent bull trend since before the beginning of the year, the recent sell-off could be seen as a natural consolidation and a small profit taking. Despite the gloomy UK economy and the downgraded global growth expectations, investors continue to appear happy about investing in equities. The losses are slowly being eradicated this morning as the selling momentum seems to be drying up with the FTSE heading higher to 5560 at the time of writing. Despite the bearish alignment of the moving averages on the hourly chart, the RSI crossed back above 30 generating a buy signal.
From a technical point of view, the big picture remains positive for the UK blue chip index with the market holding firmly above the 89 SMA. Long positions could target recent highs around the 5915 area, with major support area for the bulls to watch by 5690. In the alternative scenario, a break below 5700 could open the door for the 61.8% Fibonacci level at 5604 to be tested.
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