The FTSE 100 rallied during the trading session on Wednesday as we are now above the 7100 level. This is a good sign, as we have broken above the short-term resistance to continue the upward momentum and a potential threatening of the psychologically and structurally important 7200 level. The market has a proclivity to move in 200-point increments, and that certainly looks to be the case going forward. I think that we will continue to find buyers on dips, especially near the 7000 handle, which is a large, round, psychologically significant figure and an area that has shown itself to be supportive over the last several sessions.
If we were to turn around and break down below that level, then it is obvious that the 50-day EMA then comes into the picture, as it was the dynamic support level that so many traders have been paying attention to for a while. With that scenario, I believe that we are looking at a move towards the upside regardless, and I think that short-term dips will continue to be looked at as a value proposition more than anything else. Below there, we also have the 6800 level, which is a large, round, psychologically significant figure, but perhaps more importantly, it is an area where we have seen a major breakout. By breaking out the way we have and retesting it a couple of times, it clearly looks as if it is the current “floor in the market.”
If we were to break down below that level of 6800, it is hard to tell what would happen next, but it certainly would not be good. Nonetheless, I believe that the FTSE 100 continues to strengthen from the reopening trade and inflation, as it tends to drive asset prices higher anyways, at least for a while. Because of this, I think what we are seeing is a scenario where traders are going to make a move towards 7200, before breaking out and sending this market closer to the 7400 level, possibly even the 7500 level by some time near the end of summer. We are in a “risk on” type of environment, and there is no reason to fight that sentiment right now, as it would be a great way to lose money.
