FTSE Farewell to December Seasonals

The FTSE is on track to posting its first declining December since 2002 if it ends the month below 6,650. No other global equity index has rallied in over the last 10 Decembers.

The percentage of FTSE-100 shares trading above their 200-DMA falls to 58%, the lowest level since October. When using the weekly chart (focusing only on Friday closes), the level becomes the lowest since November 2012.

The steady declining participation of individual FTSE-100 shares suggest an internal exhaustion, which may render individual shares more attractive for the buy-&-hold investing crowd.

The breadth indicator (200-DMA participation) sheds light on any unfolding divergence between the price of the index and the number of individual components. In today’s case, the participation rate is steadily declining alongside the index.

With average Price/Book and Price/Earnings ratios at 1.9 and 16.0, it stands a little cheaper than the S&P500 at 2.6 P/B and 16.8 P/E respectively, but fairly similar to the Dax-30 at 1.7 and 15.4.

-5% Increments

Since its highs in late October, the FTSE-100 has fallen 5%, which is similar in magnitude of the decline from the mid-September highs to the mid-October low. Interestingly, the decline from the August 1^st high to the August 22^nd bottom was 4.5%. The index hasn’t had a decline of more than 10% since June.

First Negative December since 2002?

The FTSE is on track to posting its first declining December since 2002 if it ends the month below 6,650. The index has been partly pressured by the Bank of England’s gradual departure of aggressively dovish statements in recognition of the persistent improvement in fundamentals. Over the past 4 weeks, the top performing industries have been technology (+6%), followed by telecoms (3%) and healthcare (-0.7%). The worst performers are basic materials (-7%), utilities (-6%) and consumer services (-4%).

Charting the technical of the FTSE-100, the index faces interim support at 6,415, coinciding with the 55-week moving average. The average has held since July. Weekly sentiment indicators (stochastics) suggest that any deterioration would be limited to December, before a gradual recovery ensues next month to recapture current levels.