FTSE Retreats to Key Fibonacci Levels
After powering to all-time highs at the start of the month, the FTSE 100’s uptrend has started to falter with the index pulling back more than 300 points during the last two weeks. Let's explore the reasons behind this pullback and identify key levels where the index might find support.
Why is the FTSE Falling?
Rising Bond Yields:
Concerns about prolonged high global interest rates have driven bond yields higher, making bonds more attractive compared to stocks and putting downward pressure on the equity market.
Strong Sterling:
The British pound has surged to a 21-month high against the euro due to persistent inflation in the UK. Investors are speculating that the Bank of England will delay rate cuts longer than the European Central Bank. A stronger pound negatively impacts FTSE’s multinational companies.
Natural Market Cycles:
It's crucial to recognise that uptrends often experience periods of correction. These pullbacks are not necessarily the end of a trend but can present opportunities to enter the market at favourable risk/reward levels.
Key Levels to Watch
The FTSE’s pullback has brought it to some significant support levels that could potentially halt the decline if the long-term uptrend resumes:
50% Fibonacci Retracement (April Swing Low to May Swing High): The recent trend from April to May offers a smooth basis for Fibonacci retracements. The FTSE has now reached the 50% retracement level of this move, making it a critical point to monitor.
50-Day Simple Moving Average (50MA): This moving average coincides with the 50% Fibonacci retracement level mentioned above, adding further weight to its importance as potential support.
February 2023 Highs: Before the breakout in April, the highs from February 2023 served as significant resistance. In an established uptrend, former resistance levels often become support as traders look to buy back in.
38.2% Fibonacci Retracement (October 2023 Lows to May 2024 Highs): Fibonacci retracements can be taken from longer term trend legs and this is a prime example. A 38.2% retracement of the impressive run higher from October 2023 to May 2024 comes in just below the levels mentioned above and should be closely watched.
FTSE 100 Daily Candle Chart
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80.84% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Why is the FTSE Falling?
Rising Bond Yields:
Concerns about prolonged high global interest rates have driven bond yields higher, making bonds more attractive compared to stocks and putting downward pressure on the equity market.
Strong Sterling:
The British pound has surged to a 21-month high against the euro due to persistent inflation in the UK. Investors are speculating that the Bank of England will delay rate cuts longer than the European Central Bank. A stronger pound negatively impacts FTSE’s multinational companies.
Natural Market Cycles:
It's crucial to recognise that uptrends often experience periods of correction. These pullbacks are not necessarily the end of a trend but can present opportunities to enter the market at favourable risk/reward levels.
Key Levels to Watch
The FTSE’s pullback has brought it to some significant support levels that could potentially halt the decline if the long-term uptrend resumes:
50% Fibonacci Retracement (April Swing Low to May Swing High): The recent trend from April to May offers a smooth basis for Fibonacci retracements. The FTSE has now reached the 50% retracement level of this move, making it a critical point to monitor.
50-Day Simple Moving Average (50MA): This moving average coincides with the 50% Fibonacci retracement level mentioned above, adding further weight to its importance as potential support.
February 2023 Highs: Before the breakout in April, the highs from February 2023 served as significant resistance. In an established uptrend, former resistance levels often become support as traders look to buy back in.
38.2% Fibonacci Retracement (October 2023 Lows to May 2024 Highs): Fibonacci retracements can be taken from longer term trend legs and this is a prime example. A 38.2% retracement of the impressive run higher from October 2023 to May 2024 comes in just below the levels mentioned above and should be closely watched.
FTSE 100 Daily Candle Chart
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80.84% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
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