The London Stock Exchange (LSE) is currently trading at 8,778.00, with a short-term bearish trend evident in 2024. The performance of the LSE paints an interesting picture, with a burst of bullishness in November and December 2023, followed by a decline in 2024. As a trader, it’s important to gauge the market forces behind current price movements.

Technical analysis presents interesting insights when picking the right financial instruments to trade. For example, the current level of the LSE is marginally higher than the 200-day moving average of 8,542.01 but beneath the 50-day moving average of 9,077.16. The trend lines are bearish.

From a Bollinger Bands perspective, the upper band (9,251.21), the centre band (8,974.20) and the lower band (8,697.19) indicate that the market is oversold. This typically results in an upward revision towards the centre line at 8,974.20. As a trader, it’s important to understand and identify these types of trends since they are based on dynamic market performance in real-time.

Interestingly, the 52-week trading range for the LSE is 7,142.00 on the low end and 9,438.00 on the high end. Viewed in perspective, the LSE is in the middle/upper-performance quadrants of its 52-week run. Breaking it down further, we find the year-to-date performance is -5.39% (in line with the trends we see in the chart above), but the 1-year performance is +14.57%.

While the FTSE 100 pales in comparison to the 1-year performance of the NASDAQ 100 index + (31.03%) and its year-to-date of +4.39%, there is still upside potential to be had. 

These technical indicators are readily available on all the top trading platforms, including MetaTrader 5, which is ideally suited to online stock trading. MT5, like its predecessor MT4, is the go-to selection for a growing number of retail and institutional traders online.

The Types of Data That Impact Prices of Stocks, Commodities, Indices, and Currencies

The pricing of financial instruments is not determined in a vacuum. An intricate combination of seemingly disparate factors combines to shape the markets. Foremost among the determinants of prices for these financial instruments are inflation, interest rates, employment figures, geopolitical considerations, etc.

  • Inflation rates – When gauging the price of a financial instrument at a macroeconomic level, inflation rates routinely arise as a top consideration. With rising prices comes diminishing real money purchasing power. This impacts economic activity in a big way. The inverse relationship between rising prices and demand factors into the equation with almost every product or service, barring essentials.
  • Interest rates – Interest rates are often the flip side of the inflation rate. To combat inflation and drive it towards the standard Federal Reserve Bank target of 2%, interest rates must rise to remove excess money supply from the economy. Broadly speaking, higher interest rates have a contractionary economic effect because of the fact that less credit expansion takes place. Consumers and investors are more likely to have their available funds tied up, earning higher interest rates than circulating in the economy.
  • Employment figures – employment is either rising, falling, or stagnant. The Labour Force Participation Rate (LFPR) is a measure of the percentage of the labour force that is participating (working or looking for work) in the economy. A good figure is around 2/3+ of the labour force. This measure is always highest in the 25 – 54 age range, given that those people are the most productive components of the economy. Younger than that, many are in school or just coming out of school. Older than that, many are moving towards retirement or reduced working hours.
  • Geopolitical considerations – geopolitical considerations have become the most pressing concern in recent months, what with multiple hotspots opening up all over the world. Ukraine/Russia, Israel/Gaza, China/Taiwan, North Korea/South Korea, and others are either actively erupting or simmering. The most notable effect on stocks, commodities, indices, and currencies is volatility. That means heightened uncertainty across the board. When major escalations in conflict take place, this drives up the price of crude oil, which in turn has an inflationary effect on pricing throughout the economy. This domino effect is compounded by actions such as pirating activity in the Red Sea with cargo ships being hijacked by pirates.
  • US Dollar Index – The US dollar index, or DXY, is a dynamic indicator measuring the world’s premier reserve currency (USD) against a basket of other currencies. These include the Swedish krona, the Japanese yen, the euro, the British pound, the Swiss franc and the Canadian dollar. While not a measure on its own (it is influenced by all other factors) it provides a snapshot that is really useful to currency traders.

This small sampling of variables shaping the pricing of financial instruments highlights the importance of due diligence with online trading. It’s essential to invest the necessary time and effort in understanding market drivers.

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