Has the FTSE's Breakout Already Failed?
Last week looked like a major breakthrough for the FTSE 100. After months of trading beneath the February highs, the index finally pushed into fresh record territory. Yet by the end of the week, buyers had failed three times to hold those gains. That doesn't necessarily mean the breakout has failed, but it does make this week's price action especially important. The market has now reached the point where it needs to prove those higher prices can be sustained.
Three Attempts, Three Weak Closes
A breakout is only the first step. What matters next is whether the market accepts those higher prices.
The FTSE spent much of last week trying to do exactly that. Wednesday saw the index test the February highs before closing back beneath them. Thursday brought a more convincing push into fresh all-time highs, only for much of the breakout to fade before the closing bell. Friday then produced another attempt to build on those gains, but once again buyers lost momentum into the close.
Viewed individually, none of those sessions would be especially concerning. Together, however, they suggest buyers are beginning to meet more determined selling as the index trades in uncharted territory. That's not enough to declare the breakout has failed, but it does mean the market has yet to demonstrate clear acceptance of these higher prices.
UK100 Daily Candle Chart
One reason the pullback has remained relatively contained is the breadth beneath the surface. Financials, defence stocks, energy and miners have all continued to provide support over the past week, even as some heavyweight names such as AstraZeneca and Barclays have lagged. That broader participation has helped prevent the selling from becoming more widespread.
The Four-Hour Chart Holds the Answer
The four-hour chart provides the framework for what comes next.
Despite the weaker closes at the end of last week, the broader sequence of higher lows remains intact and the July breakout above 10,725 has not yet been broken. From a tactical perspective, that keeps the recent weakness firmly in the category of a pullback rather than a confirmed reversal.
That leaves two scenarios to watch. If buyers step back in and reclaim last week's highs, it would suggest the recent selling was simply profit taking after a strong advance, reinforcing the broader uptrend. However, a decisive move back beneath the July breakout level would begin to undermine last week's breakout, increasing the probability that the move above the February highs was premature rather than the start of a sustained leg higher.
UK100 Four-Hour Candle Chart
For now, the breakout remains intact. Whether it develops into a lasting move or becomes a failed breakout is likely to be the FTSE's most important question this week.
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