FTSE 100 Price Outlook: UK stocks well placed to advance further

FTSE 100 PRICE - NEWS AND ANALYSIS

FTSE 100 Price Outlook: UK stocks well placed to advance further
  • The FTSE 100 index is a leading London-listed stock that is poised to grow further thanks to Wall Street strength and earnings optimism.
  • These factors should outweigh market expectations for an imminent tightening in UK monetary policy, and poor Covid-19 data.

LONDON STOCKS UPSIDE BCKONS

London's FTSE 100 index was slightly lower in European trading on Wednesday, but it is becoming more apparent that its trend towards higher continues, partially due to Wall Street stocks. The S&P500 index closed Tuesday in New York with a 0.7% increase, just below its record high.

Additionally, stocks continue to be a good investment because of the "risk on" sentiment. The latest UK Inflation Data were positive and showed unexpected drops in September. It is possible that earnings optimism can also play a role.

The Bank of England is expected to remain one of the major central banks to tighten their monetary policy. Market pricing shows that there is just 7.8% chance that the UK Bank Rate will not be at 0.25% in September 2019. The latest Covid-19 data from the UK shows that the numbers are getting worse.

The chart below shows that the FTSE is still trending higher, and it remains within shouting distance from its highest level since February 2020. It was at the beginning of this week.

FTSE 100 PRICE CHART, DAILY TIMEFRAME (FEBRUARY 23, 2021 - OCTOBER 20, 2021).

BULLISH SENTIMENT DATA

The IG client positioning data is sending a bullish signal regarding sentiment. IG's retail trader data shows that 34.81% are net-long with the ratio of short traders to long at 1.87-1. The net-long trader count is 6.39% lower than yesterday, 22.16% lower last week, and the ratio of traders short to long is 1.87 to 1.

DailyFX is known for its contrarian approach to crowd sentiment. The fact that traders are short suggests that FTSE 100 prices could continue to rise. Moreover, traders are now net-shorter than they were yesterday and last week. This combination of current sentiment with recent changes gives us a stronger FTSE 100 bullish contrarian trading bias.

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