What’s Happening? UK 100 had a nice run from Mid-February through mid-April, but has started to slide back in recent weeks. A golden cross that should have been a bullish technical signal appears to be failing, an ominous portent. UK markets could be active this week with the Brexit referendum campaigns increasingly in the news and a number of major monthly UK economic reports due this week. Technicals: After trending lower through much of 2016 and early 2016, the UK 100 turned the corner in February. At that time, a positive divergence between the RSI and the index emerged when a new price low was not confirmed with a new momentum low. Since that sign of exhaustion, the UK 100 turned the corner driving up from near 5,500 in February almost to 6,500 two months later. In recent weeks, the index has retrenched which is not uncommon, but the fact that it has remained below its 50 and 200-day averages following a breakdown is technically worrisome. Even more troubling is that a golden cross of the 50-day average moving back up above the 200-day appears to be failing with the index struggling, which could turn a bullish sign into a bearish sign. At this point, the index needs to retake 6,200 to get back on track with next resistance near 6,450 the top of a trading channel. Should it falter, however, initial support may appear near 6,050 or the 6,000 round number. A break of 6,000 would signal the start of a downtrend with next potential support near 5,875. Fundamentals: Uncertainty surrounding next month’s Brexit referendum may continue to impact trading in UK stocks in the coming week. In addition to speculation on what could happen after the votes are tallied, the impact of the pending vote on the UK economy may also play a role. A number of recent UK economic indicators including employment growth, PMI, industrial production and construction spending have been running below expectations, suggesting that consumers and businesses are reluctant to make big commitments until after the vote. Traders may look to this week’s UK inflation, employment and retail sales reports for confirmation or rejection of the lower spending trend. We could see divergences within the index between sectors with a larger exposure to the UK economy like Financials, Utilities and some consumers or Industrials potentially more sensitive to Brexit sentiment and economic figures. On the other hand, the big miners and energy companies listed in London may be more sensitive to swings in energy and metal prices. Client Sentiment Client trading has been favouring the bullish side lately with both the number of clients and position value running 60-70% bullish. Clients are not quite as bullish has they had been previously however as shown by the 10 point drop in top client position value last Friday from 81%-71%. This suggests that some traders may have been taking positions off the table or some people going short with the index struggling short of the averages

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