Footsie Fortunes

THE last couple of days have seen an incredible spike in the FTSE 100. The UK's large-cap index has raced higher by more than 100 points, as nervous 'short' traders have scrambled to buy back their positions ahead of the summer lull. But as a contrarian trader, I'm seeing this as an opportunity to take profits.

The Footsie index broke through the 14-month support line at 4424 a couple of weeks ago. This signalled a fresh threat to the markets. Sure enough, the new trend that has emerged is a gentle down-pattern, which should send shares slowly lower.

Pessimists are again targeting the technical and psychological level at 4300, twice tested in the last week or so. Beneath that lies 4220, a drop of more than 200 points from today!

On the upside, the top of the new bear trend is at 4465. So if sentiment is good over the next few days, the index could pop up to that level before renewed selling caps further rises.

Generally, summertime means sideways movement for the stocks. But the overall technical opinion is that the markets will head lower. And although we'll inevitably see some up-moves, the 'squeeze' in the market over the last couple of days offers us an ideal opportunity to take profits on existing positions and relax for the summer.