FTSE 100 Technical Outlook: It’s All About 7300
- FTSE 100 has confluence of support growing, with the 200-day MA added
- Repeated tests of 7300 weaken with each attempt to break, a close below would be big
- Support is support until it isn’t, still remains a range-bound market for now
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Last week, when we took a look at the FTSE 100 it was on the verge of breaking down amidst a ‘risk-off’ move in global markets, but major support held (again). The 7300-level and February 2016 trend-line have done a good job so far of keeping the market propped up after the footsie was rejected a month-ago near the June record high. The amount of support in the vicinity of 7300 has grown with the addition of the 200-day moving average quickly rising up.
The previously mentioned rejection near old record highs could still turn out to be a double-top in the event we see the neckline (7300) cleanly breached. Yesterday, the market made another attempt at breaking the level but managed to recover and hold onto not only big horizontal support, but the longer-term trend-line too. If there is a market which is currently flirting with a major technical failure, it’s the UK. Repeated tests of critical support suggest it may not be long before we see a break. Each visit of support weakening it just a little more.
But before assuming it will break, we must maintain that support is support until it isn’t. This view at least points to a market with a neutral bias for now, even somewhat positive at the moment. However, should we see strength from here it won’t be long before the mid-7400s become a problem to overcome. Range-bound conditions continue to dominate trade, making it a market for traders looking to fade levels until something gives.
Should we see a daily closing bar below all recent lows (7289 was the 8/29 low), then all support (’16 trend-line, 7300, 200-day) will have been broken. This would likely usher in a move towards ~7100 and worse. But, again, we must wait for confirmation before getting overly aggressive from the short-side. Looking higher, it will take a move above recent highs in the mid-7400s to spur upward momentum, but even then, given levels not far above, conviction in the rally will be low.
FTSE 100: Daily
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---Written by Paul Robinson, Market Analyst
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.