The FTSE 100 breaks below the 6,500 points over concerns about the Euro-zone

First of all let me wish to all of you a Happy New Year filled with joy and happiness and many exciting moments that make our lives more special. It has been a while since I last wrote to you as the Holidays’ period didn’t hold much in terms of developments or volatility in the FTSE 100. However, now that the Holidays are over and traders are coming back to their desks the UK stock market is once again attracting interest.

Over the past couple of weeks what we saw in the FTSE 100 was a consolidation attempt around the 6,600 points area. There was no news or developments domestically or overseas to drive the FTSE outside this comfort zone and with participation in the market at low levels due to the Holidays the FTSE seemed happy to trade around this important figure.

What is clear now is that this consolidation marked the end of the bullish rally we witnessed during the last month of the year, a development that is quite common around this period of time. The FTSE 100 ran an impressive 500 points rally from mid-December until the end of the year but now that 2015 is here things are starting to look a little bit different.

During the first session of the year on Friday the FTSE hinted towards a reversal towards lower levels and the miss in the Manufacturing PMI report was only the first bearish development. The investment sentiment has taken a hit over the weekend mainly due to two reasons: the upcoming Greek elections that brought back concerns about the viability of the Euro-zone and an increased chatter on whether the UK should remain part of the European Union in the years to come.

The result was a decline today and the FTSE is already trading below the 6,500 points level which I consider an important pivot point. This development leads me to believe that over the next sessions the FTSE 100 will extend its losses and my first area of interest lies at the 6,350 points.

I wouldn’t go as far as suggesting that we could see a full reversal of the previous uptrend and find the FTSE trading below the 6,200 points again but definitely the bias is bearish at this time and I think that any opportunities of shorting the index will offer a good amount of profit. I must stress here that it’s still early in the year and liquidity is still thin so caution should be employed on all trades.

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