The FTSE 100 has come under pressure over the past couple of weeks, but the headline index only tells part of the story. Strength in heavyweight energy stocks has provided an important cushion while weakness has spread across much of the wider market.
That makes the recent deterioration in the FTSE's short-term structure worth watching. With UK employment and inflation data due ahead of Thursday's Bank of England decision, this week should provide a useful test of whether the wider market can start to rebound.
Short-term structure starts to weaken
The change on the daily chart is subtle but increasingly difficult to ignore. After forming another lower swing high beneath the summer peak, the FTSE slipped below the rising trendline from the March low, the 50-day moving average and an area that had previously provided support.
None of those developments needs to be treated as a reversal signal in isolation. Together, though, they suggest the sequence of higher lows that carried the index through much of the summer has been interrupted.
FTSE 100 Daily Candle Chart
Past performance is not a reliable indicator of future results
The longer-term picture remains firmer. The 200-day moving average continues to rise beneath the market, so for now the weakness is better viewed as deterioration in the shorter-term structure rather than a broader change in trend.
What would repair the picture?
The four-hour chart gives us a clearer framework. Buyers responded once the sell-off reached the lower part of the recent range, but price is now moving back towards an area that previously provided support.
Reclaiming that area and beginning to hold above it would make the recent weakness less significant. Beyond there, the Anchored VWAP from the July high provides another useful reference for judging whether the shorter-term character of the market is improving.
FTSE 100 Four-Hour Candle Chart
Past performance is not a reliable indicator of future results
If the recovery struggles around former support and starts to weaken again, the lower highs visible on the daily chart become harder to dismiss.
A stronger index than market
The one-week heatmap helps explain why the headline FTSE has held up as well as it has. BP and Shell have been among the stronger large-cap performers as oil prices have risen, providing meaningful support to the index because of their size.
Away from energy, the picture is much weaker. Pressure has spread across several areas of the market, including healthcare, industrials and mining, with a number of heavyweight constituents also moving lower.
FTSE 100 One-Week Heatmap
Past performance is not a reliable indicator of future results
There is an awkward twist to that energy strength. The same rise in oil supporting BP and Shell is also adding to the inflation concerns that have pushed expectations for future UK interest-rate rises higher.
A hold from the Bank of England on Thursday remains widely expected, making the voting split and the Bank's assessment of the inflation backdrop particularly important. Employment and inflation data beforehand should add another layer to that debate.
Rather than trying to predict the reaction, there are two things worth watching. If the FTSE can recover the short-term structure it has recently lost while strength begins to spread beyond energy, the recent weakness becomes easier to dismiss. If the index struggles and its resilience continues to depend heavily on a handful of oil majors, the weaker picture beneath the surface deserves more attention.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 89% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
That makes the recent deterioration in the FTSE's short-term structure worth watching. With UK employment and inflation data due ahead of Thursday's Bank of England decision, this week should provide a useful test of whether the wider market can start to rebound.
Short-term structure starts to weaken
The change on the daily chart is subtle but increasingly difficult to ignore. After forming another lower swing high beneath the summer peak, the FTSE slipped below the rising trendline from the March low, the 50-day moving average and an area that had previously provided support.
None of those developments needs to be treated as a reversal signal in isolation. Together, though, they suggest the sequence of higher lows that carried the index through much of the summer has been interrupted.
FTSE 100 Daily Candle Chart
Past performance is not a reliable indicator of future results
The longer-term picture remains firmer. The 200-day moving average continues to rise beneath the market, so for now the weakness is better viewed as deterioration in the shorter-term structure rather than a broader change in trend.
What would repair the picture?
The four-hour chart gives us a clearer framework. Buyers responded once the sell-off reached the lower part of the recent range, but price is now moving back towards an area that previously provided support.
Reclaiming that area and beginning to hold above it would make the recent weakness less significant. Beyond there, the Anchored VWAP from the July high provides another useful reference for judging whether the shorter-term character of the market is improving.
FTSE 100 Four-Hour Candle Chart
Past performance is not a reliable indicator of future results
If the recovery struggles around former support and starts to weaken again, the lower highs visible on the daily chart become harder to dismiss.
A stronger index than market
The one-week heatmap helps explain why the headline FTSE has held up as well as it has. BP and Shell have been among the stronger large-cap performers as oil prices have risen, providing meaningful support to the index because of their size.
Away from energy, the picture is much weaker. Pressure has spread across several areas of the market, including healthcare, industrials and mining, with a number of heavyweight constituents also moving lower.
FTSE 100 One-Week Heatmap
Past performance is not a reliable indicator of future results
There is an awkward twist to that energy strength. The same rise in oil supporting BP and Shell is also adding to the inflation concerns that have pushed expectations for future UK interest-rate rises higher.
A hold from the Bank of England on Thursday remains widely expected, making the voting split and the Bank's assessment of the inflation backdrop particularly important. Employment and inflation data beforehand should add another layer to that debate.
Rather than trying to predict the reaction, there are two things worth watching. If the FTSE can recover the short-term structure it has recently lost while strength begins to spread beyond energy, the recent weakness becomes easier to dismiss. If the index struggles and its resilience continues to depend heavily on a handful of oil majors, the weaker picture beneath the surface deserves more attention.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 89% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Haftungsausschluss
Die Informationen und Veröffentlichungen sind nicht als Finanz-, Anlage-, Handels- oder andere Arten von Ratschlägen oder Empfehlungen gedacht, die von TradingView bereitgestellt oder gebilligt werden, und stellen diese nicht dar. Lesen Sie mehr in den Nutzungsbedingungen.
Haftungsausschluss
Die Informationen und Veröffentlichungen sind nicht als Finanz-, Anlage-, Handels- oder andere Arten von Ratschlägen oder Empfehlungen gedacht, die von TradingView bereitgestellt oder gebilligt werden, und stellen diese nicht dar. Lesen Sie mehr in den Nutzungsbedingungen.