Review of FTSE-100 shares
Comment of the Day

July 29 2011

Commentary by Eoin Treacy

Review of FTSE-100 shares

Eoin Treacy's view This has been a tumultuous few weeks. The US Dollar has been under pressure, the Eurozone debt crisis does not appear to have had the resolution many assumed last week, government bonds have rallied and Wall Street pulled back sharply over the last few days.

I thought it might be instructive to click through the constituents of the FTSE-100 to see how shares have been reacting to the news flow. To do this I went to the International Equity Library and selected FTSE-100. I then simply clicked on the first share, 3i Group, and went through the list by hitting the Next button. Alternatively I could have clicked on the green '+' sign next to each of the constituents which would have added them to my Favourites. This would have allowed me to use the View All Charts function which tiles 7 charts one above another; making viewing them a seamless exercise.

The FTSE-100 Index has been largely rangebound between 5600 and 6100 since December. It is currently mid-range and testing the 200-day MA which continues to exhibit an upward bias. A sustained move in either direction will be required to crystallise investor sentiment but the short-term trend within the range remains upwards; with a succession of higher lows since June. A fall below 5750, held for more than a day or two would be required to question this view.

The UK proved nimble at the onset of the financial crisis by getting its devaluation in early. The Pound fell from $2 in July 2008 to a low of $1.35 in early 2009. It has since moved into a process of base formation development which probably has more to do with the subsequent weakness of the US Dollar and Euro than any particular resilience in the Pound.

The Financial sector remains troubled with even some of the stronger constituents such as HSBC and Standard Chartered under pressure. HSBC has returned to test the lower side of the two-year range and the broader five-year progression of lower major rally highs also remains intact. A sustained move above 625p is the minimum requirement to indicate demand is reasserting itself in this area. Standard Chartered lost momentum from late last year and has been ranging below the 200-day MA since February. A sustained move back above the trend mean, with a rally above 1700p is required to question medium-term top formation development.

Burberry (luxury fashion) , Shire (pharmaceuticals) and Weir Group (oil, mining & utility services) have all performed extraordinarily well but are becoming increasingly overextended relative to their respective 200-day MAs and the likelihood of a reversion towards the mean continues in increase.

Fresnillo is one of the world's larger silver miners. It has rallied impressively since June and is now testing the December peak near 1800p. While some consolidation in this area is a possibility, a sustained move below 1450p would be required to question medium-term upside potential.

Royal Dutch Shell (primarily natural gas) yields 4.69% and continues to consolidate mostly above 2100p. A sustained move below that level would be required to question medium-term upside potential. BG Group found support in the region of the 200-day MA from June and has bounced impressively. A sustained move below 1300p would be required to begin to question medium-term upside potential.

IMI (oil services) remains in a rivetingly consistent medium-term uptrend defined by an unbroken progression of higher reaction lows. A sustained move below the 200-day MA, currently near 967p would be required to question medium-term upside potential.

GlaxoSmithKline (pharmaceuticals) yields 3.71% and is an S&P Europe-350 dividend aristocrat. Given its strong record of dividend increases and solid business model, the share might be considered defensive. It broke out of a more than three year base earlier this month and a sustained move below 1250p would be required to check medium-term potential for additional upside.

Unilever (consumer goods) yields 3.76%. It failed to sustain the break above 2000p last month and has pulled back into the 18-month range. A countermanding upward dynamic is now required to indicate a return to demand dominance and to offset scope for a further test of underlying trading.

Diageo (beverages) is also a dividend aristocrat and yields 3.14%. The share remains in a consistent medium-term uptrend defined by a progression of higher major reaction lows. These would need to be taken out, with a sustained move below 1150p to question the consistency of the advance. SABMiller, also in beverages, lost momentum somewhat over the last year but has held its progression of higher reaction lows. A sustained move below 2100p would be required to question medium-term uptrend consistency.

Next Plc. (retail) yields 3.28% and broke out of a more than yearlong range in the region of the 2007 peak three weeks ago. A clear downward dynamic and/or sustained move below 2150p would be required to question medium-term scope for additional upside.

Experian (credit scoring) yields 2.2% and has been ranging in a relatively gradually reversion towards the mean since late last year. This has now been completed and a sustained move below 750p would be required to question the consistency of the medium-term uptrend.

The above shares demonstrate the global orientation of the FTSE-100 and that those leveraged to the growth of the global consumer's purchasing power are outperforming. A number are now at a juncture where they should find support if their medium-term uptrends are to remain consistent.

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