The FTSE 100 has rallied a bit during the session on Thursday, right where we needed to see a do so in order to continue the overall trend. This is because we were at the bottom of an ascending channel, and of course the 50 day EMA as well. This all started during the Wednesday session, when we touch the bottom of the ascending channel, only to turn back around and close right at the 50 day EMA, and in the process of forming something that looks a lot like a hammer.
That being said, we have rallied quite nicely to recapture the 7000 handle, which of course is a large, round, psychologically significant figure, and an area that will attract a lot of attention in and of itself. Furthermore, we have closed towards the top of the range for the session, so it does suggest that we probably get a little bit of follow-through. If we can recapture the 7100 level to the upside, then I think we are often running as it would in theory break out above the top of an ascending triangle.
There is a little bit of a gap just below the 7200 level that I think we may go looking to fill, but if we can break above 7200, then we can continue to see this market climb right along with this ascending channel to go to much higher levels. At that point, then I think it is just simply a matter of buying on dips as it has been for several months, and therefore the FTSE 100 should just move right along with both other large indices around the world as central banks continue to flood the markets with liquidity, thereby having people run away from certain assets and heading towards riskier assets such as stocks.
The other scenario of course is that we break down below the uptrend line and the hammer from the Wednesday session, kicking off somewhat negative pressure and could send this market down towards the 6800 level, and then possibly the 200 day EMA that is reaching towards that area. I believe that there will be even more support in that area but if we were to break down below the 200 day EMA, then I think the market could drop rather significantly and more of a “risk off” type of situation.
