FTSE 100 Weekend Analysis 2nd - 6th November 2009

The FTSE 100(UKX) fell 1.8 percent this week, posting its biggest weekly drop since March. The main drag on the market were Oils and miners weighed down by weak commodity prices. Banks reversed earlier gains in the week as its US peers fell, with a record nine banks being closed in one day.

"Let's face it, the GDP numbers were stimulus driven -- cash for clunkers, etcetera. When that stimulus runs out, how are we going to be left?,"

Technical Outlook

I have attached a daily chart of the FTSE 100(UKX) Index. The Index has been trading within a respectable channel since mind July 2009 until we witnessed a break out this week.

There was an inside bar after the break out(an inside bar is a bar which is completely within the range of the preceding bar, i.e. it has a higher low and lower high than the bar immediately before it. An inside bar indicates a time of indecision or consolidation) on the 29th October which led to the vicious drop on friday 30th October.

The Index is now at a potential double bottom at the psychologically key 5000 level. The important point to note is that the wick(purple horizontal line) on the last two occasions formed a double bottom(14 sept & 2 Oct) and double top(24 & 28 aug) at 4950, therefore it would be wise to consider a stop loss below 4950 before taking out any long positions on the market.

If 4950 is breached then this Index becomes very bearish, please see support levels below for the next target on the downside.

If we produce an outside bar(trade above 5168) and manage to trade above the downward sloping light blue trend line, then there will be a shift in sentiment and we will trade higher, please see resistance levels below.

Support Levels;
5000, 4953 , 4910, 4840,4740, 4780 , 4700

Resistance Levels,
5080, 5168, 5190 , 5300

wallstreet1928

you trade at your own risk, always do your own analysis