UK stock markets are consolidating within a volatile price range following the early May sell-off, which marked just over a 10% countertrend move on the FTSE100, 350 and 13.4% on the mid-cap FTSE250.
Looking at the chart (see pdf report) we can see the FTSE100 trading range between 5,800 and 5,500. Also evident is the short-term triangle forming between sideways resistance and rising lows.
So where do we go from here? Investor sentiment is still absorbing the knock from the rapid downside action and we expect more of the same erratic consolidation over the summer before hopefully seeing the longer-term uptrend reassert towards Q4. From a shorter-term point of view, we will look for the breakout of the aforementioned triangle for directional trades.
Breadth: Bullish% plays catch up
Breadth data continues to unwind from extreme oversold territory. We show the bullish% indicator (which measures the number of stocks within an index or sector group holding Point & Figure uptrends), catching up with the improvements on the faster moving average based indicators. The FTSE100 Bullish% has recovered back to the 40% level, which has been the bottom for the three-year bull market (see pdf report).
However, we remind our readers that sustainable bull-market recoveries generally need breadth scores to average 50% and above, so we will need to see this indicator hold above the important 40% mark. On the other side of the coin, should the bullish% once again turn down, we will view this as a major negative for the market.
Download the report for more analysis