FTSE’s outlook conservatively bullish

The last time we discussed the FTSE 100 it was trading just above the 6,500 points area, a level that had been confirmed as a medium-term support. I said that the key resistance area seemed to be around the 6,650 level and a break above this should be followed by more gains towards the 6,700 and 6,800 points levels.

Since then the UK benchmark index has been on a moderate uptrend that led it above the 6,650 threshold but what this uptrend lacks is momentum and follow through and that’s the reason why the FTSE is still hovering around the 6,680 area.

This should be attributed to the latest string of mixed data coming from the UK and abroad. The general economic climate during this week was mixed: on the one hand we had the discouraging Euro-zone inflation report that missed the mark. On the other hand German Retail Sales picked up and unemployment dropped. At the same time the important Services’ PMI reports showed that the sector is dealing with sluggish growth in the UK and Europe in general.

The way the FTSE reacted to these reports leads me to believe that investors and traders have been holding back from committing into any serious trades on the main UK index this week. I believe what they’re waiting for is Friday’s US jobs report to either support the current uptrend or cancel it altogether.

Last month the labor market data printed in a positive fashion for the US economy and there’s potential for another steady printing for the report this month as well, although there are hints that a surprise to the downside is also possible. For example, the US Non-Manufacturing ISM index printed lower than expected, this is the index that monitors how the non-manufacturing sectors, hence mainly the Services sector, are fairing. Given that the US is primarily a services-based economy this piece of data is alarming.

To sum up, my view over FTSE’s outlook for the next week is largely correlated to the US jobs report, if the data print positive or even at a steady manner then I see no reason for the FTSE not to pick up momentum and look for higher levels. However, if the jobs report shows weakness in the labor market  during the past month then I am confident that the FTSE will revisit the 6,500 points lows.

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