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FTSE 100 Technical Analysis: Rolls Over from Year-ago Levels

FTSE 100 Technical Analysis: Rolls Over from Year-ago Levels

Paul Robinson,

What’s inside:

  • The FTSE 100 failed to make a move above Aug '15 levels
  • Momentum in favor of the shorts at the moment
  • BoE on Thursday

The last time we visited the FTSE 100 was on Wednesday of last week, and we highlighted the ascending wedge visible on the intra-day time-frames. Which direction it would break, in being consistent with our methodology, we suggested to wait and react rather than predict. As it turns out, the formation was a ‘dud’ and provided little solid directional indication, which was not to be fully unexpected given the break was to the upside, and to the upside was plenty of resistance. After poking above the August 2015 peak, the FTSE reversed and put in a small ‘pin bar’ reversal day.

The ascending wedge didn’t provide a good directional trade, but it did reach its apex before volatility picked up, which sometimes is all these converging patterns are good for – an indication volatility is about to rise. The past two sessions have seen the market cover most of the area the FTSE traveled from July 12 up until its highest point last week.

Momentum is in favor of short psoitions at the immediate moment. Support comes in around 6610, below there we have to dig about 100 points or more for the next level of significant support. Resistance now stands strong around 6745/80.

The market could continue to range from here, hard to say. The FTSE has a tendency to make large moves, then go through extended periods of 'nothing-ness'.

We do have a high impact event, though, coming up on Thursday which could provide a boost to volatility and clarity on market direction. The BoE meets to make a decision on rates, its asset purchase target, and publish its inflation report. Expectations are for the central bank to reduce its rates to a record-low 0.25% from 0.5%. It remains to be seen how the market will react, and could largely have to do with any language expressed by the BoE. Large chunks of the rebound in the FTSE 100 following the referendum was in anticipation of the BoE easing; this skews risk to the down-side should market participants feel disappointed.

Track trader sentiment in real-time with the DailyFX 'Speculative Sentiment Index'.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.