FTSE 100: Earnings boost and new chart levels

The FTSE 100 is up 180 points since mid-afternoon Monday. China has simmered down and investors appear to have forgotten about Greece. Instead, the focus has shifted onto earnings, and with few shocks and some decent beats, the UK index is up for a third day.

Indeed, we're just over a quarter of the way through the results season and over 130 European companies have reported. So far, the net number of companies beating on earnings is running at a five-year high. But stocks are highly-rated right now and this trend must continue.

"Even with the correction in the equity market since mid-April, European equites are trading above long run averages," point out UBS. "The Bull market over the last four years has been driven entirely by P/E multiple expansion with no earnings growth. This has left the P/E multiple at 15.2x - above the long run average of 14x.

"This means that for the Bull Market to continue we need to see earnings growth. As we pass the mid-point of the year, it's time for earnings to turn up if this is to be the first year in five years for earnings growth."

While a number of UK firms have beaten earnings forecasts recently, much of the second-quarter profits recovery is being driven by the eurozone - the UK is still negative. Still, our technical analyst friends at Trends & Targets have plotted their latest FTSE 100 chart points and come up with potential trends.

Writing last night, chartist Alistair Strang says:

"[We] have a target level above 6,677 and it's at 6,725. We also have an 'it's all going wrong' level at 6,575, essentially the immediate uptrend since the 27th. A break below this level will tend signal coming weakness to 6,527."

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