What’s inside:
- FTSE 100 tough to get a clean look from a trading perspective in the near-term
- Running with the long-term trend and overall bullish price action
- February 2016 trend-line, June low, and 200-day MA hold the key to maintaining outlook
How is ‘Brexit’ expected to impact the FTSE 100 and Sterling in Q3? Find out here!
From the last time we discussed the FTSE 100 earlier last week until now there has been some day-to-day volatility, but little net change has occurred during that time. It’s the market environment we’re in right now. It’s the reason we took a broader view of the index last week as opposed to the more granular views often taken in these posts. We’ll continue to do so until market conditions evolve into a more ‘trader-friendly’ environment.
The broader trend has been clearly higher over the past year, with a series of higher lows and higher highs paving the way for investors. But it hasn’t been a market which one can chase once in new record territory; when the FTSE has been at its best it has been the time to turn cautious. This isn’t behavior isolated to just the footsie (markets often work like this), but it’s on clear display as evidenced by the deep retracements before forging on to new record heights. This puts the dip-buyers in the driver’s seat.
So, where we at right now? Well, we’re not at a trough of any type; we’re coming out of one, actually. But, price action is rounding the corner in a bull-flag configuration of sorts (it’s not the most defined). It would be ideal if we saw a drop and test of the trend-line rising up from the February 2016 low before paving the way higher. The trend-line holds a fair amount of importance given the significance of the 2016 low and the fact the trend-line connects with ‘Brexit’. The more important events were around the connecting points the more important the line.
If we don’t get a test of the trend-line, a break above the top-side trend-line coming off the June record high could be the trigger for bringing in sustained buying pressure. What would turn the overall bias neutral or even outright bearish (depending on how it unfolds) is a decline below the 2016 trend-line and a lower low below the late-June low at 7302. The 200-day isn’t too far below both of these support levels, and if that were to go as well then it would further strengthen a bearish case. Overall, it would be the first lower-low in quite some time, a change in market character. But we’ll worry about that when the time comes…and it will at some point, it just doesn’t appear as if it will be any time in the immediate future.
FTSE 100: Daily
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---Written by Paul Robinson, Market Analyst
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