The bull trend for FTSE is still intact but strength is proving progressively more difficult to maintain, according to Michael MacDonald, Head of Research at UK-based independent research firm XATS.
MacDonald points out that overbought RSI readings have started to turn down and a negative divergence between the recent price high and the stochastic has appeared (see Chart). He does not rule out further gains however, though he thinks psychological resistance at 8000 should provide a significant barrier.
In the coming months MacDonald expects downside risks to increase as bullish investor sentiment fades. He says the close below 7500 has opened up the 7100/20 level and a break below 7000 would confirm a multi-month bear trend and a move to an outright negative stance.