Everybody thinks the FTSE 100 needs to reverse lower but will it?

The FTSE 100 has run an incredible rally the past week, climbing from the 6,600 points to above the 6,800 points’ barrier at the end of the week.

The UK stock market was lifted on the back of the anticipation and confirmation of the new easing package from the ECB that means that cheap money will continue to be available to European investors.

However this was not the only piece of news that sent the FTSE skyrocketing to these highs again. I feel that it is important to mention here the release of the minutes from the last BoE meeting as well where any hopes for a rate hike within 2015 have vanished. The two members of the committee that have been voting in favour of a rate hike have changed their minds and now the committee remains unanimous in their views that this is not the time for tightening.

So where does this leave the FTSE 100? The truth is that the current rally has gone a long way and the market looks really overbought from a technical point of view. So I wouldn’t rule out a correction sometime soon, possibly within this week. However the fundamental outlook is pointing towards further gains for the stock market as cheap money will continue to be available for investors and traders alike. And I kind of think that the fundamentals are too strong to overlook this time.

I think it will be interesting to see how the market will react the following days, I have been discussing with a lot of market participants that thinkthat this rally needs to come to an end and these levels cannot be sustained. To my mind though this sounds as the perfect environment for the FTSE 100 to continue climbing on the medium term as everyone will be betting against it. I am very keen to see whether my instinct will serve me well in this occasion.

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