Technical analysis

British stock index made a bullish breakthrough this past week. Although gains were limited and the benchmark erased some of them on Friday, the overall technical sentiment remained in favour of the bulls.

One of the major U.S. stock indices breached the horizontal resistance line of the bullish triangle continuation pattern on the daily chart below. Although the weekly highest rate was rewritten last week, the daily resistance was breached only thanks to the weekend gap last Monday.

The tech-heavy stock index overperformed the rest of U.S. major indices this past week. NASDAQ 100 gained almost 2%, closing the past week above the all-time high noted on the week of July 22. Positive earnings reports from several tech giants forced equity investors to keep the bullish rally.

Although the past week was negative for British equity bulls, and the FTSE 100 benchmark declined by 1.17%, the overall technical sentiment is bullish and here is why. The squeezed long-term weekly chart shows the performance since April 2014.

Equity investors kept using the buy-dips trading strategy this past week as there was another long downside shadow on the weekly candlestick registered. The sequence of higher lows remained in play, and that points to the uptrend as the general direction.

The past trading week was rather nervous for global equity investors as macroeconomic reports and global growth concerns added pessimism on Wall Street. U.S. ISM Manufacturing and Services PMI surprisingly declined in September, causing a sharp-sell-off in major stock indices.

The tech-heavy index extended losses, charting second consecutive bearish candlestick on the weekly timeframe. The decline was moderate as the index lost only -1.49% of its value, falling to 7693.8 points. Although the market noticed low demand from equity investors, the technical sentiment signals that a potential bottom is rather close to current quotes.

The more the trade war between the US and China appears permanent, or amenable to only limited improvement, the better the United States looks as a destination for discretionary funds. But that is not the only advantage for the US.

The US dollar has been on the back foot as the US and China got closer. The British pound extended its advance as Brexit is fading away, and the euro recovered from the ECB’s stimulus. What’s next? The Federal Reserve is in the spotlight in the upcoming week, but the BOE and the BOJ will also compete for attention. Here the highlights for the next week.

The index completed the bullish reversal pattern on the daily chart (see the screenshot below), and set to continue the long-term uptrend.