The FTSE 100 broke above the previous high at 6831, this move is probably the start of a short term advance. Sentiment is positive and the timing indicators are not yet overbought, which means there is room for the index to climb in the next few days.
Latest economic reports show a robust construction sector in the UK. The construction PMI was higher than anticipated and in the US the ISM manufacturing PMI was also higher and factory activity rose to its highest level in nearly four years.
Stock markets are rallying on good economic numbers and hope that the ECB will announce some measures to boost the economy tomorrow. On the negative side the conflict in Ukraine could easily escalate and there is a risk UK and US interest rates will rise earlier than anticipated.
Given the falling price of Crude Oil one would think that investors don't expect an escalation of the conflict in Ukraine but this could change rapidly, the situation over there is volatile and the same could be said about Iraq. There is also an increased risk of a terrorist attack in the UK, these are factors that could de-stabilise the stock market.
The FTSE broke a key resistance level without completing a normal pullback. I was expecting a deeper pullback before the rally starts. The risk is that the FTSE will produce a deeper pullback before rallying.