What’s Happening? The UK 100 has been trending lower for the last several months but now looks like it may be starting to turn around. Many of the headwinds that had knocked major UK stocks lower appear to be easing potentially setting the stage for a sustainable recovery trend. Technicals: The UK 100 has generally been trending lower for most of the last year, and has been under clear distribution since early December, steadily falling in a channel of lower highs and lower lows. Signs have emerged, however, that suggest this downtrend may be ending. A new low earlier this month was not confirmed by the MACD, a sign of slowing downward momentum. Recently, signs of recovery have started to emerge. Following a bear trap washout below 5,500 earlier this month, the UK 100 has been on the rebound with 5,873 a 23% Fibonacci retracement emerging as higher support after an initial rally. Currently, the index is back above 6,000 and testing the downtrend resistance line of its three month falling channel. A break through 6,065 would end the downtrend and signal an upturn with next potential resistance near 6,111 a 38% retracement level, then 6,304 a 50% retracement level. Comparing the performance of the UK 100 over the last year with the US 30 and Germany 30, once can see that the UK 100 particularly underperformed its peers last fall. In recent sessions, it’s recovery has been keeping pace with the US market, and has been outperforming the German market. Fundamentals: The fundamental outlook for the UK 100 also appears to be looking up. It’s higher weighting in energy and mining companies that held it back in 2015 and even into early 2016 could become an advantage once again moving forward. In addition to stocks, the price of crude oil appears to have bottomed out lately with Brent crude rallying back up toward $35.00 and WTI regaining $30.00. Movement toward truces between oil producing countries in their market share war worldwide and their proxy war in Syria, could start to limit some of the downside for crude even though its upside also looks limited until producers agree on and deliver actual cuts. One step at a time… Metal prices have also started to recover, which could help to boost a mining sector that had become particularly depressed by the end of 2015 (Glencore for example). Copper can benefit from China concerns easing while Gold can continue to benefit from signs the USD may have peaked particularly if the Fed backs away from recent hawkishness. A less hawkish Bank of England may also help to support the UK 100. Last week’s strong retail sales growth showed that the UK economy remains robust, but Bank of England Governor Carney has been more dovish lately. The potential for a close Brexit vote is likely to stop the Bank of England from raising interest rates in the first half of the year, which may depress GBP and boost UK stocks, particularly the big multinationals that comprise a large chunk of the index weight.