FTSE 100
In a lackluster trading month, the FTSE 100 managed to eke out a gain of just +0.49%. A loss of momentum may point to lower prices ahead.
After a solid start to May, the UK’s benchmark index could not hold the gains and chopped lower for the remainder of the month.
On May 10th, the FTSE 100 set a new record for 2021 at 7,166.40. Three days later, it was -5% lower at 6,819.
Trading for the balance of May lacked clear direction, and yesterday’s monthly close of 7,010.70 was only slightly higher than April’s 6,974.0.
The FTSE 100 has to some extent, been held back by the strength of the British Pound. This has worked against many of the exporting companies that make up the index.
Sterling is trading at $1.4180 against the US Dollar and just shy of the 2021 high at $1.4241.
Additional pressure was applied when BoE member Gertjan Vlieghe suggested the bank may consider raising interest rates as early as the second quarter of 2021.
We can see on the 4-hour chart that buying momentum is clearly slowing. Since peaking on the 10th of May, the price is running into selling at increasingly lower levels.
The index has also broken below a rising trend line from the low on the 13th.
Another negative indicator is the MACD. This has been trending lower for the last three weeks. This also suggests that the bullish sentiment is reversing.
If the market opens Monday below the trend line, it should extend lower towards 6,900. A series of low points on the chart provide moderate support between 6,910 and 6,930.
However, on a deeper decline, the FTSE 100 could trade back to the low of the 13th at 6,819.
A close above this weeks high at 7,053.7 would cancel the immediate bearish outlook and likely lead to a test of the 7,080 high of the 25th
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