The FTSE 100 fluctuated in very choppy and indecisive trading on Monday. It currently looks as if the 7000 level above will continue to cause serious issues, so it is not going to be easy to get above there. If we do though, that would obviously be a very bullish sign and could open up a much bigger move. At this juncture, you can see that I have drawn a line on the chart that extends to the 7200 level, which is the measured move from the ascending triangle underneath. The 50-day EMA has been walking right along that uptrend line in the ascending triangle, so it all looks very neat and tidy for typical technical analysis.
In the meantime, I think that we bounce around between the 6800 level on the bottom, which should now be supportive due to the fact that it was so resistive previously, and now has even seen a strong reaction already. This tells me that the market is very likely to continue to find buyers on dips. By breaking above the 7000 handle, it opens up the possibility of the market to go much higher. The 7200 level above will more than likely be difficult to overcome, but if we do, and if history has anything to say, you can see that the 200-day increments in the past have mattered, and therefore one would have to think that the 7400 level then comes into focus.
If we did break down below the 50-day EMA, then it opens up a move down to the 200-day EMA, which is currently just crossing the 6500 level. We are in an uptrend overall and stocks continue to see money flow into them around the world, so I do not see why the FTSE would be any different. Furthermore, a lot of traders are out there looking at the “reflation trade” in buying anything they can get their hands on. The overall attitude of the markets has been bullish for some time, but they have also been very messy. You should keep that in mind as you trade this market, because to expect gains would probably be a bit much. All of this being said, I would become much more aggressive above the 7000 handle as it would be such a major shift.
