The FTSE 100 had a very good Friday to close out the week, closing at the top of the range for the session as the momentum continues. Now that we are well above the 7000 handle, it is very likely that we will look at that as a major support level. Pullbacks at this point that reached down towards that area will almost certainly attract a lot of attention, not only from a headline standpoint but also from a psychological standpoint as well. In other words, this is going to continue to be a “buy on the dips” type of market based upon the parabolic move that we have seen over the last couple of days.
You could even call this a “three white soldiers pattern”, something that suggests that we have much further to go. I think that any time we get a short-term pullback, you should be looking for signs of support that you can take advantage of. I also believe that we are going to go looking towards the 7200 level rather quickly, and then perhaps as high as the 7500 level given enough time. The 7200 level is the measured move from the ascending triangle, which is a very bullish formation.
Even if we do break below the 7000 handle, I think that the top of the ascending triangle, which is at the 6800 level, should offer support as well. With that being the case, the market will likely see bullish pressure going forward, so I have no scenario in which I'm willing to short this market. Furthermore, the Bank of England has noted that it is getting ready to taper its bond buying program, which denotes that the Bank of England believes the economy is going to strengthen. Obviously, that helps the stock market, as real demand could be part of the cyclical move in the British economy as we are starting to see the United Kingdom think about fully reopening. If and when they do, that should bring in a lot of the so-called “pent up demand” that economists will talk about in these scenarios. If that is going to be the case, then it follows that the FTSE 100 should continue to be a beneficiary. As far as a longer-term target, I believe 7500 makes sense.
