Is the FTSE set for a tumble?

stock exchange ftse
Analysts predict bullish-to-bearish market reversal

While European stocks are enjoying sharp gains, boosted by the auto, mining and banking industries and optimism that the European Central Bank will extend its stimulus programme. However there are fears that the FTSE 100 Index could fall by as much as 10% after this year’s impressive benchmark performance.

Since June there has been a marked pattern, known by technical analysts as a “head and shoulders” pattern; this is normally a precursor to a bullish-to-bearish market trend reversal.

After near-record close in October, some analysts are predicting a fall to below 6,650, to as low as 6,164, Francis Hunt, known as The Market Sniper, told Bloomberg. He has previously accurately predicted the crude prices slump in 2014 and the failure of the eur0-Swiss franc floor in 2015.

“We have a head-and-shoulders pattern that is well-formed, showing a degree of exhaustion,” Hunt told Bloomberg. “All we need is a sustained move below the neckline — the 6,650 level — for a final confirmation. That’s when people should short.”

  • The FTSE 100 traded at 6,871.13 as of 10:43 a.m. in London. Hunt predicts it will breach the 6,650 level in the early weeks of 2017.
  • Cyclical shares, including banks and commodity producers that are among the FTSE 100’s biggest members, are “at risk of taking a breather,” UBS Group AG’s technical analysts including Michael Riesner wrote in a note Tuesday.
  • Weaker sterling and increased stimulus from the Bank of England after the U.K.’s secession vote boosted exporters in the months after Brexit. The FTSE 100 is up 10 percent this year, outperforming all western-European benchmarks except Norway’s.
  • “The pound is coming back up, which makes things pretty difficult for the FTSE 100,” said Andrea Tueni, a trader at Saxo Bank in Paris. “It’s trading not far from the head-and-shoulders neckline. Crossing it could spark a selloff.”
  • Sterling hit a two-month high on Tuesday, following its first monthly gain since April.

Source: Bloomberg

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