Skip to content

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Momentum slowing as UK FTSE Index scales to new highs

Upward momentum is slowing as the UK FTSE Index stages fresh record highs; while there is scope for medium-term gains, a minor pause in the short-term can’t be ruled out and what are the signposts to watch?

Source: Bloomberg

There is more evidence that upward momentum is slowing as the UK FTSE 100 index scales to record highs, raising the prospect of a pause / minor retreat in the rally.

To be sure, there is no sign of reversal – indeed higher highs on the daily charts imply that the trend is still up. However, the higher highs are getting registered on slowing momentum suggesting buyer fatigue could be setting in given the extent and the pace of the rise over the past few months (see the daily chart).

This is especially so as the index is testing quite a tough hurdle, including the upper edge of a rising channel from 2003 (now at about 8350), slightly above the 2018 high of 7903 (see the monthly chart).

FTSE daily chart

Source: TradingView

Unless the index stops making new highs, the path of least resistance could still be up. In other words, at the very least, the index needs to stop making new highs for any consolidation to take place. Moreover, any consolidation may not necessarily imply a reversal of the uptrend – the FTSE 100 index could well go sideways.

In this regard, there is plenty of support on the downside that could restrict any potential pullback. The initial cushion is at the January high of 7875, followed by the end-January low of 7708, near an uptrend line from October. Stronger support is on the 200-day moving average, roughly coinciding with the lower edge of the Ichimoku cloud.

Source: Bloomberg; chart created by Manish Jaradi

As noted in the previous update, technical and breadth market indicators suggest there is scope for a further rise in UK equities in the coming weeks/months. There is more evidence from breadth market indicators recently supporting an optimistic outlook.

As of Thursday, 87% of the members in the UK FTSE 100 index were above their respective 30-week moving averages (WMA), not too far from 90% a week ago. Data from 2002 onwards suggests that when 88%-94% of the members were above their respective 30-WMAs, the index has been up 63% of the time over the subsequent 90 days (the distribution plot on the right panel).

In addition, last week, 46% of the members were at new 8-week highs. In cases where 40%-46% of the members stage new 8-week highs, the index has been up 60% of the time over the subsequent 3 months (the distribution plot on the left panel).

FTSE monthly chart

Source: TradingView

Looking beyond the near term, from a multi-week perspective, a potential bullish reverse head & shoulders pattern (the left shoulder at the 2018 low, the head at the 2020 low, and the right shoulder at the 2022 low) suggests any consolidation could be short-lived (see weekly chart).

This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Explore the markets with our free course

Discover the range of markets you can spread bet on - and learn how they work - with IG Academy's online course.

Try IG Academy

Turn knowledge into success

Practice makes perfect. Take what you’ve learned in this index strategy article, and try it out risk-free in your demo account.

Try it out

Ready to trade indices?

Put the lessons in this article to use in a live account. Upgrading is quick and simple.

  • Get fixed spreads from 1 point on FTSE 100
  • Protect your capital with risk management tools
  • Trade more 24-hour markets than any other provider – 26 in total
Create live account

Inspired to trade?

Put the knowledge you’ve gained from this article into practice. Log in to your account now.

Log in now

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Monday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

You might be interested in…

<h3>How much does trading cost?</h3>
<h3>Find out about IG</h3>
<h3>Plan your trading</h3>

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.