The FTSE remains under pressure but the upside looks attractive

The FTSE 100 had a series of volatile sessions this week and it seems that this theme will continue over the next trading days as well. Since last Friday when we discussed the FTSE’s outlook a number of events swung the index up and down.

The tensions in Crimea and the referendum that took place there over the weekend was the main risk factor. However, even though the domestic population voted in favor of joining the Russian Federation and Russian President Putin signed a treaty to annex the region stock markets reacted calmly.

There was a widespread fear that the rumored EU and US sanctions towards Russia would escalate the situation there but the fact that nothing more than a war words took place reassured investors and the FTSE threatened to end the downtrend as it climbed as high as 6,670 points.

But it was Janet Yellen’s press conference on Wednesday that put pressure back on the UK index. The new Fed Chairwoman reaffirmed her intention to continue on course with the tapering schedule since the US economy seems to be picking up pace again after the disappointing first 2 months of the year.

What troubled investors was the fact that Yellen mentioned a rather specific time-table to raise interest rates after tapering ends. The Fed boss was quoted saying that it’s likely that they will raise rates “around 6 months” after the end of their tapering campaign which places the supposed raise sometime around the summer of 2015.

Over the next week I see the FTSE being volatile as it currently is, we still have to see how investors will reposition themselves after Fed’s firm intention to reduce the stimulus to the domestic economy. Also keep in mind that the next week holds a number of important events for the British economy, the inflation report on Tuesday and also the aftermath of the positive labor data released a couple of days ago have the potential to fuel a relief rally for the UK index.

I remain cautious over the next few days regarding the FTSE’s outlook, I am conservatively bullish and I believe that the key level to watch would be the 6,670-6,700 points area as a move above this would put the UK index on track for further gains.

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