Possible exit and pickup in the FTSE!

After yesterday's news about turning the FTSE into a higher weighted index similar to the Nasdaq today we have seen a directional upward correction. The truth is that the London index already lived through a bubble in the 90's, and although this value weighting is currently very diversified with a lot of weighting to defensive companies or productive sectors, unlike in those times: financials account for 19.20% of the total, non-cyclical consumer 16.41%, health 12.77%, commodities 9.35%, energy 12.71%, cyclical consumer 7.98%, %, industrials 9.58%, and real estate 1.01% respectively. What can be seen is that inflation and industrial production data, as well as British CPI and 10-year bond sales, have been clearly reflected in the value of the index directly, this has also been represented in the British currency strongly. We will see if the Eurozone growth and employment data will move the EURGBP cross.

On the technical aspect, the last candlesticks of price recovery after the last shoulder-head-shoulder, were very clear. On February 8 we had a crossover of the 21-day and 100-day averages, on February 12 we had again the crossover of the 100-day and 233-day averages. And currently the three averages are inverted. If we look at the RSI divergence, the index is overbought. And the current price zone indicates 7504.89 points. If we look at the index on a monthly basis it is progressing in an uptrend, and since the end of November when the index went sideways, there has been a double bottom. It is possible that this oversold could signal two things: On the one hand, that the movement despite being at 69% overbought can continue to climb back to the top of the channel to 7775.85 points at its current high. Or on the other hand, that the price may not hold and fall back to that 7408.60 floor that has taken hold. It is possible that the export data could be affected, given that its main clients are the US and the Euro zone.

Ion Jauregui - AT Analyst

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