FTSE 100: More Pain Ahead As Long As It Trades Below 5717
The FTSE 100 (FXCM: UK100) is lower by 1.69% at the time of writing. All sectors are lower with the exception of Basic Materials which is up by 0.51%. The biggest loser is Technology (-4.20%), followed by the Financial sector (-2.88%).
The FTSE 100 is short term oversold as the index trades below today’s support 2 (S2) level of the Pivot Point indicator. This may trigger profit taking, lifting the index to the latest breakdown level of 5590. This is also the January 2016 low.
If price indeed reaches the breakdown level, I suspect traders will use this to unload losing long positions, while trend followers will use the bounce to add to their bearish exposure. The FXCM SSI Snapshot sentiment indicator shows that there are 3.4 long positions for every short one.
For the trend to turn bullish, the index needs to breach the 5717 high, which is the latest swing high.
Initial jobless claims are on tap this afternoon and expected to decline to 280K from 285K. However, given the bearish sentiment and yesterday’s relatively hawkish Fed comments, I don’t expect any major low to be formed at this stage.
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FTSE 100 | FXCM: UK100
Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano
--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com
Contact and follow Alejandro on Twitter: @AlexFX00
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