The FTSE 100 remains directionless in the midst of political and social uncertainty

Since the beginning of the month the FTSE 100 has been trading sideways between the 6,100 and 6,200 points’ levels, excluding a brief break downwards that was quickly reversed the next day. It is evident that the London index is looking for direction but the fundamental drivers just aren’t there to convince traders to get behind a move in the FTSE.

My analysis indicates that the most likely direction for the index to break is towards higher levels since the major global economies are doing fairly well. The US are considering raising interest rates sometime within 2016, we might not know when and how many times but they’re certainly not looking to ease and the UK is not doing bad itself either.

However something is lacking, investors are just not truly convinced that the stock markets should be trading higher and remain defensive at this time. Is it the fact that this year was expected to be a strong year for stock markets but it actually started on the wrong foot that keeps investors cautious? Is it that they are not yet fully convinced that central bank easing is behind us and we’re looking towards a tighter monetary environment sometime soon?

Whatever the reason the FTSE 100 remains range bound and today’s terrorist attacks in Brussels make it even harder for the stock markets to break into fresh gains. Europe has been under terrorist threat since the beginning of the year with the Paris incidents, the attacks in Turkey and now with Brussels investors have every reason to be sceptical. Add to that the upcoming Brexit referendum and you see why the FTSE really looks directionless given the uncertain social/political environment.

Having said that though, I am not considering a move lower. Even though the political and social environment is quite volatile and will probably remain as such for now I don’t think there’s any reason for investors to pull out of their stock positions. So I continue to look upwards and again I need a clear and sustained break above the 6,200 points to go long and target the 6,300 points’ area as my first target.

alpesh

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