The FTSE 100 rallied significantly during the trading session on Tuesday, but now that we are above the 7000 level, it looks as if we are going to try to get towards the top of the same ascending triangle. Breaking above that 7100 level could send this market much higher, trying to take out that gap just above. Obviously, the FTSE 100 has a ways to go to catch up with continental indices, as the CAC attests to. We did close at the top of the range though, and that does suggest that we will go higher.
Pullbacks at this point will more than likely continue to offer value which people are willing to jump in and take advantage of, but it is also worth noting that the market has been very noisy as of late and clearly the FTSE has been a bit of a laggard, which in and of itself will tell you something. Furthermore, the 50-day EMA underneath has offered a little bit of support, but do not forget that it has been sliced through previously.
I do believe that at one point or another we will have to see some type of catalyst to go higher, if for no other reason than there is so much noise just above. This could be a simple matter of having a “risk on attitude” for the markets, and it is also possible that we will see volatile trading over the next several sessions until we get some type of clear catalyst. I do not know what that catalyst will be; it may simply be a situation where all stock indices go higher and the FTSE 100 simply follows. However, I would suggest that if European indices in general get beaten up a little bit, the FTSE might be one of the biggest victims. At that point, I would short this market instead of others such as the DAX or CAC. The FTSE will outperform the IBEX in Spain, but as far as some of the more common indices and bigger ones, not so much, as there are still a lot of concerns about the economy is going forward. At this point, the FTSE is simply going to follow the others.
