We should not have doubted quite as much as we did, the FTSE’s potential to show the lead to the world’s major stock indices. In our Stock Markets review last weekend we were too dismissive of the idea of the FTSE indicating that the way was going to be down. All of the other indices were moving up so we surmised that it was just the FTSE that was out of step.
It wasn’t and we were wrong. Yesterday all the markets moved downwards with the FTSE again leading the way. And there is likely to be more downside to come. At the moment the FTSE has the potential to fall to the 5400 area.
The FTSE 100 is continuing to find it difficult to break above the resistance created for it at the 5770 level area. Despite a good performance on Friday it is still stuck in the doldrums underneath the 5770 level. For six consecutive weeks now this resistance has prevented the FTSE from moving further upwards.
In turn this can create a situation where the index can become exhausted by the effort involved in the many weeks of trying to breakout above the resistance and this can be the cause for it to give up and to fall quickly backwards instead. We have seen this sort of situation before where the expenditure of energy required in continually hitting its head on the resistance is such that the resulting exhaustion kills off any remaining buyer support and causes the index to fall away quickly.
However, there is one important factor present in the current situation which should not only prevent this happening but which should also provide the impetus for a coming breakout. And that is that all of the other major indices either have already broken out above their resistance levels or, as is the case with the FTSE 250 and Smallcap indices, are in process of successful breakouts. The important S&P 500, as well as the DJIA and the Nasdaq 100 have all moved impressively above their recent resistance levels.
So, whilst it is possible that the FTSE 100 is going to show the World markets the way for them to follow (downwards) it is highly improbable and it is much more likely that the FTSE 100 will, this week or next, be pulled up by dint of arbitrage and be able to put the 5770 level behind it and to commence its move up towards the next level at 6160.
Individual market commentary and illustrative charts are available at http://www.sharehunter.com/news/market-review/
For the 3rd week running the FTSE has been hiiting its head against the 5770 level as it attempts to break above its resistance. It is indiocative of the underlying strength of the index that it has not fallen back in any of the three weeks; each time it has closed the week in positive territory.
The liklihood is, therefore, that the FTSE is going to succeed in breaking out above 5770 and then to rise by another 300 to 400 points (about + 7%) up towards a test of the resistance at the 6160 level.And this looks likely to start next week.
However, and it is an important ‘however’, should the FTSE not manage to close clearly above 5770 next week (say at 5820 at least) then the risk of a retracement becomes much greater and the liklihood will be for a fast fall back to the 5400 level area. Even that, of itself, would not effect a change of the dominant trend of the market which is, and would be, still in Uptrend with the promise of higher values.
The FTSE is being supported by the strength showing on Wall Street where the S&P 500 index has now left behind the resistances of the 1122 and 1167 levels and looks set for a continuing rise up to an eventual test of the resistance at the 1290 level – a further 8% – which would reflect well for a similar rise in the FTSE where a 7% rise is possible.
The other positive news for the market’s continued Uptrend is that our Momnetum Indicator is recovering its upward trend (in support of the rising indices) although its rise is still not emphatic enough for us to be able to feel entirely confident of the indices and to feel that a sharp retracement is still a possibility.
So the summation is – yes, be ‘in there’ but be careful, watchful and do not commit 100% to this market.
Individual market commentary and illustrative charts are available at http://www.sharehunter.com/news/market-review/
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