Weekly Markets Diary - Indices

UK 100 Weekly

The UK 100 weekly chart helps to put the recent falls into perspective.

Over this timescale, we can see how from the pandemic lows in early 2020 the market attempted to recover. By early 2022 it had got back to pre-pandemic levels.

However, from this point we can see how the market struggled to gain any further ground. During the summer it had at least managed to hold the psychologically significant 7,000 support area. But as we can see in the past couple of days, this support has been breached.

From a simple technical analysis standpoint then we have had lower highs since early 2022, and now lower lows for the past six months. This sets up a bearish medium-term trend.

Is this sign of a more serious longer-term break lower back to the pandemic lows?

A full collapse back to levels under 5,000 currently do seem a long way off. However, a retracement of the 5,000-7,500 move has now opened up.

The 38.2 percent retracement of this move is down around 6640. Any future moves down to this area could still be described as a “simple” retracement of the pandemic gains. A break lower from there would trigger more serious long-term downside targets.

Taking a longer view, moves under 7,000 on the UK 100 are likely to be seen as very attractive long-term buy areas. As yet, signs of this longer-term buying being able to get the upper hand are thin on the ground, leaving the market vulnerable to ongoing volatility.

Some early positivity has emerged after the Bank of England announced it is to intervene directly into the long gilt market – can this be the catalyst for confidence to build?