Another FTSE fall in June?

CITYINDEX FTSE 100 Another June fall on its way? Having hit a 13 year high, we look into how you could trade the FTSE over the coming months FTSE 100 FACTS It broke to a new 13-year high recently of 6875.6 Highest ever level is 6950.6 (Sep 1999) This marked a rally of 99% from the March 9th 2009 low of 3460.71 DO NOT FORGET THE BOE ASHRAF LAIDI Recent 14-year highs accompanied by a growing, yet historically lower participation rates may suggest that the rally is running out of steam. But it could also mean less likelihood of a violent and prolonged decline. With the Bank of England maintaining monthly asset purchases at £375 billion for 11 consecutive months, this is the longest uninterrupted streak of asset purchases since the 22 months ending autumn 2011. Yet, the BoE has no choice but to lean towards further monetary stimulus, while inevitably rethinking its upward-leaning inflation target-the combination of which is yet another round of purchases & more upside for the FTSE 100. But this may have to wait after possible falls in June. THE BULL CASE Major global indices are also hitting new heights Rally since Mar 2009 % 137 Dow Jones 150 S&P 500 137 DAX 30 123 Nikkei New High Dow Jones 15391.84 S&P 500 1672.84 DAX 30 8462.16 Nikkei 15388.37* *5yr high FTSE 100 has underperformed major global indices from the March 2009 low. % Rise since 2009 lows % Rise year to date NASDAQ 177% NKY 225 50% S&P500 150% Dow-30 17% Dow-30 137% S&P500 17% DAX-30 137% NASDAQ 16% NKY 225 123% FTSE 100 15% HSI 108% DAX-30 11% FTSE 100 99% ASX-200 11% Bovespa** 91% CÁC-40 11% TSX 71% EurStox50 7% Weeks without 10% fall % of shares above 200-DMAA CAC-40 52 Dow-30 100% EurStox50 52 NKY 225 98% FTSE 100 51 S&P500 93% NKY 225 50 CAC-40 90% Dow-30 50 EurStox50 90% DAX-30 50 FTSE 100 85% ASX-200 50 DAX-30 77% TSX 50 IBEX35 77% HSI 50 HSI 72% ** Performance for Bovespa measured from 2008 lows "Daily Moving Average (DMA) weeks since the FTSE 100 has had a peak-to-trough 51 decline of more than 10%. Number of weeks without a 10% fall: Mar 2009 - Jan 2012 May 2006 - Jun 2007 Mar 2003 – Apr 2006 44 56 162 FTSE CORRECTION DUE? JAMES CHEN The FTSE 100 index is strongly entrenched within an exceptionally solid bullish trend, and a new all-time high should be established before long. However, a bearish correction should soon be due, with downside support objectives around 6535, 6210, and as far down as 6100, before a potential resumption of the robust bullish trend. THE BEAR CASE The 2.1% fall on Thursday 23 May 2013 was the largest single day drop for the FTSE 100 in a year. 73 The FTSE 100 has fallen in value in the month of June 73% of the time in the last 22 years. FTSE 100 JUNE PERFORMANCE SINCE 1991 Average June performance % |-1.4 Largest short-428 Largest long 250 movement pts movement pts 6 4 % 3 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 year 22 year average June movement pts -61.1" Historical performance May - Aug The FTSE 100 has fallen between May and August 73% of the time in the last 15 years. 15 10 % 5 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 -5 -10 % -15 -20 FTSE EXAMPLE TRADE You go short (sell) FTSE falls You close your position. £20 61" £1,220 pts is your profit at the end of the trading month of June. per point at the over the course start of June. of June However, if the postion moves in the opposite direction by 61pts you could lose £1,220. FTSE STOCKS MORE UPSIDE TO COME? ASHRAF LAIDI The 200-DMA participation rate for FTSE 100 stocks remains below the year's highs at a time when the index has gained in momentum. At the same time, the ascent of the latest rally phase from the lows of June has extended by 29%, which is three times less than the last major rally phase of March 09-Jan 10. This implies more upside for the 200-DMA participation rate could possibly mean more advances for the overall index, whilst slower rallies also carry less danger of violent declines. BEST STOCKS The percentage of FTSE 100 stocks trading above their 200 daily moving average (DMA) is now 84% (79% in April 2013). Important to note that this remains below the 94% peak in January 2013 at a time when the Index has gained in momentum. Suggests more upside in participation rate for UK stocks above their 200DMA, and potentially more gains for the FTSE 100. Percentage of stocks trading above their 200 DMA? 84 As of 29 May 2013 46 2 FTSE 100 stocks reached FTSE 100 stocks reached 52-week low (20 – 29 May 2013) 52-week high (20 – 29 May 2013) (Camival and Evraz) Top 10 Risers Above 200 Year to date % DMA % EasyJet 63.5 55.7 2 Hargreaves Lansdown 51.8 30 3 International Consolidated Airlines Group 51.1 40.4 Schroders 50.1 35 Rolls-Royce Holdings 40 28.7 6 BT Group 39.5 25.2 7 Prudential 38.8 23.6 ARM Holdings 38.7 27.5 William Hill 38.3 30.7 10 Meggitt 38 24.1 Top 10 Fallers Below 200 Year to date % DMA % Fresnillo -43.1 -33.8 2 Polymetal International -43.1 -33.3 3 Evraz -38.7 -40.1 4 Antofagasta -27.2 -15.6 5 Randgold Resources -17.1 -19.8 6 Rio Tinto -15.2 -9.8 Tullow Oil -14.8 -17.6 8 Anglo American -14.4 -15.6 9 Petrofac -14 -10.2 10 Aviva -9.8 -1.8 SAINSBURY'S STRUGGLING AT PRICE RESISTANCE JOSHUA RAYMOND Stocks within the financial, energy and consumer goods sectors have a combined 57% weighting on the FTSE 100. This means that by and large, these sectors dictate how the FTSE 100 trades. All three sectors remain some way off their recent 2006 and 2007 highs (energy -14.3%, consumer goods -15.6%, financials by some distance thanks to the banking crisis). At the same time, key stocks are at opportunistic price levels. For example, Sainsbury's continues to struggle to break above resistance at 400p. Tesco's shares price recovery has continued and has been justified by positive earnings and the fact that its 50 DMA has crossed above its 200 DMA. SECTORS PERFORMANCE Top 5 weighted sectors % (biggest impact on the FTSE 100) 21 19 17 8 8 SALE Pharmaceuticals Miners Retail Energy Financials % Change YTD (Ending 21 May 2013) 1 Telecommunication Services (2 members) 27.08 Information Technology (2 members) 24.82 3 Industrials (18 members) 23.19 4 Health Care (4 members) 23.18 5 Consumer Discretionary (16 members) 20.44 Financials (20 members) 18.96 7 Utilities (5 members) 17.18 8 Consumer Staples (11 members) 13.27 Energy (8 members) 10.26 10 Materials (15 members) -10.97 Take advantage of this opportunity Apply for a City Index account now Spread betting, CFDS and Forex trading are leveraged products which can result in losses greater than your initial deposit. CITYINDEX Past performance is not a reliable indication of future results or profitabilty. Published 29 May 2013 CITYINDEX FTSE 100 Another June fall on its way? Having hit a 13 year high, we look into how you could trade the FTSE over the coming months FTSE 100 FACTS It broke to a new 13-year high recently of 6875.6 Highest ever level is 6950.6 (Sep 1999) This marked a rally of 99% from the March 9th 2009 low of 3460.71 DO NOT FORGET THE BOE ASHRAF LAIDI Recent 14-year highs accompanied by a growing, yet historically lower participation rates may suggest that the rally is running out of steam. But it could also mean less likelihood of a violent and prolonged decline. With the Bank of England maintaining monthly asset purchases at £375 billion for 11 consecutive months, this is the longest uninterrupted streak of asset purchases since the 22 months ending autumn 2011. Yet, the BoE has no choice but to lean towards further monetary stimulus, while inevitably rethinking its upward-leaning inflation target-the combination of which is yet another round of purchases & more upside for the FTSE 100. But this may have to wait after possible falls in June. THE BULL CASE Major global indices are also hitting new heights Rally since Mar 2009 % 137 Dow Jones 150 S&P 500 137 DAX 30 123 Nikkei New High Dow Jones 15391.84 S&P 500 1672.84 DAX 30 8462.16 Nikkei 15388.37* *5yr high FTSE 100 has underperformed major global indices from the March 2009 low. % Rise since 2009 lows % Rise year to date NASDAQ 177% NKY 225 50% S&P500 150% Dow-30 17% Dow-30 137% S&P500 17% DAX-30 137% NASDAQ 16% NKY 225 123% FTSE 100 15% HSI 108% DAX-30 11% FTSE 100 99% ASX-200 11% Bovespa** 91% CÁC-40 11% TSX 71% EurStox50 7% Weeks without 10% fall % of shares above 200-DMAA CAC-40 52 Dow-30 100% EurStox50 52 NKY 225 98% FTSE 100 51 S&P500 93% NKY 225 50 CAC-40 90% Dow-30 50 EurStox50 90% DAX-30 50 FTSE 100 85% ASX-200 50 DAX-30 77% TSX 50 IBEX35 77% HSI 50 HSI 72% ** Performance for Bovespa measured from 2008 lows "Daily Moving Average (DMA) weeks since the FTSE 100 has had a peak-to-trough 51 decline of more than 10%. Number of weeks without a 10% fall: Mar 2009 - Jan 2012 May 2006 - Jun 2007 Mar 2003 – Apr 2006 44 56 162 FTSE CORRECTION DUE? JAMES CHEN The FTSE 100 index is strongly entrenched within an exceptionally solid bullish trend, and a new all-time high should be established before long. However, a bearish correction should soon be due, with downside support objectives around 6535, 6210, and as far down as 6100, before a potential resumption of the robust bullish trend. THE BEAR CASE The 2.1% fall on Thursday 23 May 2013 was the largest single day drop for the FTSE 100 in a year. 73 The FTSE 100 has fallen in value in the month of June 73% of the time in the last 22 years. FTSE 100 JUNE PERFORMANCE SINCE 1991 Average June performance % |-1.4 Largest short-428 Largest long 250 movement pts movement pts 6 4 % 3 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 year 22 year average June movement pts -61.1" Historical performance May - Aug The FTSE 100 has fallen between May and August 73% of the time in the last 15 years. 15 10 % 5 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 -5 -10 % -15 -20 FTSE EXAMPLE TRADE You go short (sell) FTSE falls You close your position. £20 61" £1,220 pts is your profit at the end of the trading month of June. per point at the over the course start of June. of June However, if the postion moves in the opposite direction by 61pts you could lose £1,220. FTSE STOCKS MORE UPSIDE TO COME? ASHRAF LAIDI The 200-DMA participation rate for FTSE 100 stocks remains below the year's highs at a time when the index has gained in momentum. At the same time, the ascent of the latest rally phase from the lows of June has extended by 29%, which is three times less than the last major rally phase of March 09-Jan 10. This implies more upside for the 200-DMA participation rate could possibly mean more advances for the overall index, whilst slower rallies also carry less danger of violent declines. BEST STOCKS The percentage of FTSE 100 stocks trading above their 200 daily moving average (DMA) is now 84% (79% in April 2013). Important to note that this remains below the 94% peak in January 2013 at a time when the Index has gained in momentum. Suggests more upside in participation rate for UK stocks above their 200DMA, and potentially more gains for the FTSE 100. Percentage of stocks trading above their 200 DMA? 84 As of 29 May 2013 46 2 FTSE 100 stocks reached FTSE 100 stocks reached 52-week low (20 – 29 May 2013) 52-week high (20 – 29 May 2013) (Camival and Evraz) Top 10 Risers Above 200 Year to date % DMA % EasyJet 63.5 55.7 2 Hargreaves Lansdown 51.8 30 3 International Consolidated Airlines Group 51.1 40.4 Schroders 50.1 35 Rolls-Royce Holdings 40 28.7 6 BT Group 39.5 25.2 7 Prudential 38.8 23.6 ARM Holdings 38.7 27.5 William Hill 38.3 30.7 10 Meggitt 38 24.1 Top 10 Fallers Below 200 Year to date % DMA % Fresnillo -43.1 -33.8 2 Polymetal International -43.1 -33.3 3 Evraz -38.7 -40.1 4 Antofagasta -27.2 -15.6 5 Randgold Resources -17.1 -19.8 6 Rio Tinto -15.2 -9.8 Tullow Oil -14.8 -17.6 8 Anglo American -14.4 -15.6 9 Petrofac -14 -10.2 10 Aviva -9.8 -1.8 SAINSBURY'S STRUGGLING AT PRICE RESISTANCE JOSHUA RAYMOND Stocks within the financial, energy and consumer goods sectors have a combined 57% weighting on the FTSE 100. This means that by and large, these sectors dictate how the FTSE 100 trades. All three sectors remain some way off their recent 2006 and 2007 highs (energy -14.3%, consumer goods -15.6%, financials by some distance thanks to the banking crisis). At the same time, key stocks are at opportunistic price levels. For example, Sainsbury's continues to struggle to break above resistance at 400p. Tesco's shares price recovery has continued and has been justified by positive earnings and the fact that its 50 DMA has crossed above its 200 DMA. SECTORS PERFORMANCE Top 5 weighted sectors % (biggest impact on the FTSE 100) 21 19 17 8 8 SALE Pharmaceuticals Miners Retail Energy Financials % Change YTD (Ending 21 May 2013) 1 Telecommunication Services (2 members) 27.08 Information Technology (2 members) 24.82 3 Industrials (18 members) 23.19 4 Health Care (4 members) 23.18 5 Consumer Discretionary (16 members) 20.44 Financials (20 members) 18.96 7 Utilities (5 members) 17.18 8 Consumer Staples (11 members) 13.27 Energy (8 members) 10.26 10 Materials (15 members) -10.97 Take advantage of this opportunity Apply for a City Index account now Spread betting, CFDS and Forex trading are leveraged products which can result in losses greater than your initial deposit. CITYINDEX Past performance is not a reliable indication of future results or profitabilty. Published 29 May 2013