Imply-Reversion Continues As Bears Wrestle to Consolidate Correction

Key Speaking Factors:

• Boris Johnson’s 4-stage plan to scale back social distancing measures places optimism in UK belongings
• UK shares wrestle to seek out purchaser assist as GILTS are making equities look costly
• The FTSE 100 has as soon as once more reverted to its imply inside the Bollinger Bands sample

The FTSE 100 has come again a contact from the final time I wrote about it final week, falling from the higher certain of the Bollinger vary again to its mean-reversion stage on the heart of the vary. I discussed this final week, focusing again then on 61.8% Fibonacci at 6,489, with a shift increased within the vary which means the main target is now across the 6,560 stage, the place assist has been present in the previous couple of classes.

FTSE 100 Each day chart

The optimism round a stern plan of motion in the direction of lifting the social distancing measures imposed within the UK to curb the unfold of Covid-19 is prone to be a key issue supporting the FTSE 100 going ahead, seeing as how the UK index was the principle outperformer yesterday in Europe. However vital headwinds stay for the FTSE, which continues to be attempting to fill the hole from the falls seen final March, a major drawback to most of its European friends, held again largely by the uncertainty surrounding Brexit till the tip of 2020.

Technically, the index has struggled to interrupt increased from key Fibonacci ranges, with present worth nonetheless lingering across the 61.8% retracement stage regardless of first making an attempt to interrupt it again in June 2020, adopted by a transfer above in December. Since then, the FTSE 100 has fluctuated on both aspect of it, with a push increased initially of December being rejected on the subsequent Fibonacci stage (76.4% at 6,894), and coming proper again all the way down to the 61.8% space once more.

In case you’re on the lookout for a bullish sign to enter the market, there isn’t a lot of 1 but apart from robust assist at its mean-reverting stage, though yesterday’s indecisive candlestick does put a dent within the bearish case. The consensus is that additional upside continues to be achievable, however considerations about rising bond yields – additionally within the UK, as gilts are shaping as much as supply higher returns than shares – might see worth fall earlier than financial reopening optimism absolutely will get its grip on the FTSE 100.

IF additional bearish stress seems, 6,489 – 6,460 is the important thing space I can be to check purchaser assist, with a subsequent fall under 6,400 as a key promoting sign within the short-term. Alternatively, a break above the Bollinger band vary is prone to see resistance on the 6,800 horizontal line, while a push above this space might see bullish stress return to the FTSE 100, with a stern deal with breaking above the 76.4% Fibonacci at 6,894.

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— Written by Daniela Sabin Hathorn, Market Analyst

Observe Daniela on Twitter @HathornSabin