This article was written exclusively for Investing.com
At the time of writing, there was a mild risk-enhancing tone in the markets, with European stocks opening weaker and US futures floating. Some investors seem happy to make gains on their long positions ahead of a long weekend in the US as banks will be closed Monday in observance of Presidents' Day.
Chinese markets, meanwhile, will be closed until Thursday due to the Spring Festival. and prices have also fallen. Thursday's weaker US report and moderate growth last Friday both point to weak conditions in the world's largest economy, even as the future looks bright with the continued rollout of COVID vaccines.
But while the US markets may look overloaded and some profit take-up is warranted, the UK's haven't looked too hot lately and so it can be on the long side. picks – especially now that the pound is declining a bit.
In fact, I'm pretty optimistic about the FTSE. With a no-deal Brexit avoided late last year and the UK leading its neighbors in the vaccine race, the economy should be able to recover faster once the lockdowns end. In fact, the data released this morning showed that the UK economy had already recovered strongly in December, with the 4th quarter also being stronger than expected at 1% vs. 0.5%.
The problem for the FTSE was the collecting pound. FTSE 100 voters earn a large share of their profits abroad. When foreign income from these multinational companies is exchanged for the, their profits appear less rosy than in or. The stronger pound is also negative for UK exports, as it makes UK goods and services appear more expensive abroad.
Still, with favorable UK and global monetary conditions and high government spending, the FTSE should be in my opinion. , are able to rise over time as investors price in a strong economic recovery, no matter what the pound does in the meantime.
In fact, the FTSE may be gearing up for a major escape as it is now living in THIS bull flag pattern:
If the index holds its ground around the main support of 6500, which was being tested when the report was written, then a breakout above the bull flag resistance trend could be on the cards very soon, possibly as early as later in the day.
If that happens today or early next week, the FTSE could be heading for a big rally.
In particular, the trigger point is probably 6575, the most recent high. A move above that level could lead to an immediate jump to the next problem area around 6635. After that, there is not much more resistance until this year's peak around 6900.
But potentially the FTSE could time can go much higher. for the above macro reasons.
However, the bulls need to be patient and wait for that breakout over the bull channel before potentially looking for long trades.
