Yesterday's note on Where's the loss of momentum in the earnings estimates? drew attention to analysts' earnings estimates. It pointed out that, despite the loss of recovery momentum - particularly for the US economy - earnings expectations for the S&P 500 had, in recent months, been revised upwards for this year. For the FTSE 100, the index most exposed among the major indices to the ebb and flow of the global economy, earnings expectations had remained remarkably steady.

While some modest downgrading of earnings estimates is likely, the note highlighted the fundamental underpinning that still lay behind equity markets and the basis for their limited reaction to discouraging economic news and the tedium of the eurozone's sovereign debt crisis. The other feature to which attention was drawn was their technical condition, a point discussed previously in connection with the US and Eurozone equity markets but repeated because of the oversold condition that had now developed for the UK equity market.

David Fuller's view I agree that stock markets are now somewhat oversold and there is evidence today that a technical rally has commenced. For the UK's FTSE 100 (weekly & daily), a small upward dynamic occurred today and either a countermanding downward dynamic and/or a close beneath 5600 would now be required to offset current scope for a further bounce. However, this would need to break the progression of lower rally highs with a close back above 6000 to reaffirm important support near the November 2010 and March 2011 lows.