Bond yields threaten FTSE uptrend

Price at time of writing – 6708.

In today's FTSE update I return to my main working chart of the index, which plots its path since the unique low formed in March 2009. 

The FTSE 100 remains in its primary uptrend, rising a further 86 points since my last update, and currently resides around 200 points shy of my major target at 6922. In the meantime, long positions remain open.

Since October’s surprise decision by the US Federal Reserve not to taper its quantitative easing (QE) programme, much of the spotlight has shifted away from the rising yield on ten-year gilts. This complacency could prove dangerous, however, as the yields on both US and UK ten-year government bonds are, according to my charts, in unfinished uptrends. Rising yields have the potential to knock present stock market uptrends off course. As we move to within 3% of my long-term target on the FTSE and Dow indices, any signal that ten-year yields are again on the rise would give me cause for concern. For the record, my target yield on the UK ten-year government bond remains 3.32%. 

The FTSE has run into isolated resistance at 6775, caused by the line representing a 12.5% rise from the low in June. However, the target at 6922 appears irresistible, and once 6775 is dispatched, an immediate fulfilment of this target seems to be the likely outcome.

Recommendation: stay long. Target 6922. Stop-losses can now be increased to activate on momentum below 6450 (from 6350 previously).

FTSE 100 chart

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