Some suggest the UK Index has found a ceiling in 6280 and can’t rally any further. However, while we might currently be lacking the bullish power required to break us higher, we have rallied very sharply of late and are entitled to a pause. To flip the ‘ceiling’ argument on its head there is enough bullish appetite to hold us up at said levels for the last few days and not enough bearish appetite to see us sell off. This fine balance is a positive. It keeps us hopeful that there is enough underlying bullishness to drive us 150pts higher to revisit the 6430 highs of 2016.

There is a well-known market adage that says you should ‘never short a dull market’. So however boring price activity becomes, it takes a bold call to bet on the downside prevailing. While markets rise and fall they also have periods where they sit so finely balanced that they move sideways in a tight range. And while this may prove frustrating to the short-term trader who prefers the big up and down moves rather than range-trading, it is a necessary right-of-passage in order for markets to digest their prior moves. Especially when they have been so short and sharp. As we stand the bulls and bears are deciding who has the bigger appetite for the move that follows. Looking for and pricing in drivers such as global economic growth, monetary policy, geopolitical risk and the price of oil.

As we sit, the UK Index has traded a tight 6250-62850 range for three straight days. After rallying nearly 4% in little over a weak, we think this consolidation is entirely warranted – and a market positive – as the bulls and bears take a break, having tired themselves out amid an exciting breakout and battle north. Furthermore, as we have discussed for the last week we see ourselves in the midst of bullish technical patterns that could ultimately send us back to the highs of the year.

We talked about a bullish ‘triple bottom’ technical pattern on the UK Index last week and its potential to deliver a 200pt index rally. We have already had 150 of those points. And this week’s tight sideways range is supportive of further gains being on the cards as it could merely be the mid-point pause building up to a breakout from another technical pattern – a ‘bullish flagpole’ – which sees this week’s 130pt rally emulated next week. Can we get it right two weeks in a row, with two simple patterns delivering over 250pts? To follow our close monitoring of the major equity indices, where we highlight the major trends and bullish and bearish patterns that could send higher or lower, Access our research now. It’s likely just what you you’ve been looking for to take your trading to the next level.

Mike van Dulken, Head of Research, 27 May