The FTSE 100 initially pulled back a bit during the trading session on Tuesday, but then turned around to reach back to the 7000 level. This is a market that I think continues to be very choppy, but it does look as if we are trying to build up some type of basing pattern so that we could rally. It’s worth noting that a lot of concern in the United Kingdom continues, as we have seen so much in the way of volatility when it comes to not only the British pound, but also the British government.
Now that the Brits have a new prime minister, perhaps things can settle down a bit. I would not hold my breath for that, because Rishi Sunak will find himself in the midst of a huge mess. There is a lot of work to do in the UK, so perhaps part of what we are seeing in the stock market is that people are trying to front run the Bank of England, as a lot of people believe that it will have to loosen monetary policy. That being said, it will be interesting to see how this plays out, because we have seen the Bank of England panic already, so it is a situation where just about anything can happen at this point.
- The 50-Day EMA sits just above this consolidation area, so therefore I think we will have to pay close attention to it. It currently sits at the 7100 level and is dropping.
- Because of this, I think there is a significant amount of technical resistance and that general vicinity, so if we were to break above that, then we could send this market much higher.
- At that juncture, I would anticipate that the FTSE 100 is looking to the 200-Day EMA, which is right around the 7250 level.
On the other hand, if we were to break down below the bottom of the candlestick for the trading session on Tuesday, then it’s very likely that we will see the FTSE 100 plunge towards the 6800 level. At this point, most markets are trading on raw emotion, so keep in mind that we are going to have to be very cautious with our position sizing, because the volatility is getting worse, not better from a global standpoint.
