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TECHNICAL ANALYSIS


FTSE Outperforming For Now

10/14/04 10:27:23 AM
by Arthur Hill

The recent breakout in the FTSE is bullish, but the CAC 40 and DAX have failed to follow suit and could become a drag.

Security:   FTSE, CAC, DAX
Position:   N/A

The recent breakout in the FTSE is bullish, but the CAC 40 and DAX have failed to follow suit and could become a drag. The FTSE 100 is by far the strongest of the three. In fact, the FTSE 100 is outperforming the Standard & Poor's 500, Dow Jones Industrial Average (DJIA) and Nasdaq as it has already moved above its 2004 highs.

There are two patterns at work in the FTSE 100. First, the index formed a falling flag from April to August (magenta trendlines). The breakout signaled a continuation higher and opens the door to further gains. Second, a rising price channel is evolving with the upper trendline extending above 5000. See Figure 1.

Figure 1: FTSE
Graphic provided by: MetaStock.
 
The price chart for the CAC 40 looks similar to that of the FTSE 100. The index formed a falling flag from April to August and managed to break above the upper trendline. However, the index is getting resistance from its July high and has yet to exceed the 2004 highs. As with the FTSE 100, a rising price channel could be taking shape and a move above the 2004 highs would project further strength above 4000. See Figure 2.


Figure 2: CAC 40
Graphic by MetaStock



The German DAX is the weakest of the three indexes. The index has yet to break the falling flag trendline and has yet to exceed its July high. Like the S&P 500 and Nasdaq, the DAX remains with a series of lower lows and lower highs throughout 2004. The falling flag could turn out bullish, but the index needs to move above the 2004 high to signal a continuation higher.


Figure 3: DAX
Graphic by MetaStock


The FTSE 100 has established itself as independent of the DAX or CAC 40. Great Britain prides itself on its independence from Europe, and investors are following suit. The FTSE 100 has proven itself capable of rallying in the face of a flat DAX and a flat CAC 40. However, it is likely to act differently in the face of overt weakness in the DAX and CAC 40, especially if that weakness is led by the US.



Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

Title: Editor
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E-mail address: arthurh@tdtrader.com

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Date: 10/23/04Rank: 3Comment: 
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