UK FTSE 100

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If markets are going to move higher, especially in Europe, UK’s FTSE 100 index is my top candidate for a strong breakout. Index is testing 13 year-long horizontal resistance at 6,850 levels. The fact that the market hasn’t pulled back from the resistance area shows its strength and possibly its willingness to clear the multi-year resistance. Of course, this has to be seen in the form of a decisive close above the strong resistance. In the medium-term index formed a bullish ascending triangle. Breakout above 6,850 levels will have long-term implications. Breakdown below 6,500 levels can change the bullish outlook to neutral/negative.

UK FTSE 100 INDEX

UK FTSE 100 INDEX II

DAX, NIKKEI and DJIA

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For those who are not a big fan of twitter I’m posting my latest updates on global equity markets. I believe these are important charts and are worth reviewing again. Global equity markets are experiencing a correction. Long-term trends are still intact. Long-term 200-day averages will play a significant role in determining the next direction of the long-term trends.

MSCI WORLD MARKETS

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Global equity markets can experience a pull back. MSCI World Markets index is testing strong long-term resistance levels. A pull back towards the long-term averages would result in a reversal on the MACD too. It is still early to call for a reversal but it is also extremely important to keep an eye on this long-term chart after 5 years of uptrend. Failure to breach long-term resistance at 1,690 levels could result in medium-term weakness towards 1,440-1,500 area.

MSCI WORLD MARKETS INDEX

S&P 500 and STOXX 50

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In financial markets trying to pick tops and bottoms has always been costly. Predicting the beginning of a larger scale correction or a uptrend is not only difficult but also a low probability bet. High probability set-ups are the ones when you have confirmation. Trade-off is that confirmations don’t come at the very early stages of a trend. As a result, to have a high probability trade you should be willing to miss part of the move.

S&P 500 INDEX

S&P 500 Index and Europe’s STOXX 50 had a rough week. Both indices experienced sharp pull-backs. Does this change the trend? Can it be the beginning of a larger-scale correction? We don’t know the answers to these questions… What we know is that indices are currently above their long-term averages. In the past, 200-day moving average has always been a good indicator. Breakdown of the moving average supported by a breakdown on a trend line support resulted in larger-scale corrections. In this case 1,700 levels will be important for S&P 500 index and 2,800 levels will be decisive for STOXX 50.

STOXX 50 INDEX

S&P 500 index is above historical highs which is at 1,580 levels. I’d define the strong support range for the S&P 500 as 1,580-1,700. Since the beginning of 2012, STOXX 50 index is in a uptrend. Strong support area for the STOXX 50 will be 2,700-2,800.

It is too early to call for a larger-scale correction. We need confirmation. We need to see decisive breakdowns.

INDIA, U.K. and JAPAN

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Over the past few years equity markets had strong performance. Developed markets did better than the emerging markets but overall it has been positive for equity asset class. In this update I’m sharing with you 3 long-term charts that can be the center of attention in 2014. Possible breakouts in these 3 markets can add fuel to the equity strength in the following months. India’s BSE Sensex index, U.K. FTSE 100 index and Japan’s NIKKEI 225 index are testing their long-term trend resistances. Breakout above these long-term strong technical levels can result in a multi-month uptrend and attract more investors.

INDIA BSE SENSEX INDEX

UK FTSE 100 INDEX

JAPAN NIKKEI 225 INDEX

ITALY MIBTEL & SPAIN IBEX 35

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ITALY FTSE MIBTEL INDEX II

SPAIN IBEX 35 INDEX II

Since July 2012 both indices respected their 50-day moving averages. Over the past 5 months MIBTEL and IBEX 35 rebounded twice from their 50-day moving averages. Given that the latest uptrends formed clear trend channels with their lower boundaries overlapping with the 50-day moving averages, we can conclude that any breakdown below these critical support levels could deepen the short-term corrections. Until we see a violation of the current uptrends, we should expect both indices to move higher with 18,500 levels acting as support for Italy’s MIBTEL and 9,500 levels for Spain’s IBEX 35.

TECH TRADE

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Here are some of the charts that I shared on twitter.

Compass Group had a strong breakout. Stock should move higher in the following days. This was a 7 month-long consolidation range.

I posted the long-term chart on IP GROUP last week. Stock had a strong breakout today above 160 levels. Looks very bullish.

Both Soy Meal and Cocoa stay strong with further upside potential. These are updated charts related to my earlier blog post.

An important chart that should be on everyone’s watch list. Massive long-term base formation could resolve on the upside. This chart will look extremely bullish above 1,675 levels.

NIKKEI 225 INDEX

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NIKKEI 225

16,000 level becomes more important for Japan’s Nikkei 225 index as the benchmark reaches the decade-long trend resistance. In May 2013, Nikkei 225 had a spike and tested the long-term resistance area. Sharp pullback to the 200-day average followed right after the strong rally. Now, the index is trying to reach the same trend resistance.  To be more bullish in this overextended market we should wait for confirmation and this confirmation should come with a decisive break above long-term trend resistance at 16,000 levels. Before that happens we should expect more consolidation between 13,500 and 16,000.

TECH TRADE

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ITALY MIBTEL & SPAIN IBEX 35

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ITALY FTSE MIBTEL INDEX

European equities recover from the bear market by first clearing their 200-day moving averages and then by breaking to new high levels. Two indices that have shown considerable strength over the past few months are Italy’s MIBTEL and Spain’s IBEX 35. Italy FTSE MIBTEL started gaining momentum after the breakout above 17,700 levels. Uptrend is intact and the index just completed a minor consolidation in the larger scale uptrend. We can expect the index to resume its uptrend in the following weeks.

SPAIN IBEX 35 INDEX

Spain’s IBEX 35 index gained strength after breaking out of its year-long sideways consolidation at 8,800 levels. Similar to Italy’s MIBTEL index, Spain’s IBEX 35 just completed a minor sideways consolidation which is expected to be part of a larger scale uptrend. Both indices have positive technical outlook and should target higher levels in the following months.