The FTSE 100 rallied again during the trading session on Wednesday only to turn around and sell off to form a bit of a shooting star. The shooting star sits just below the 7100 level, an area that has been resistance previously, and it certainly looks as if the resistance should hold. At this point, if we break down below the bottom of the candlestick for the trading session on Wednesday, then I believe that the market will go looking towards the 50-day EMA at the 6981 level. Breaking down below that level then opens up even more selling, as it would show signs of exhaustion.
The market has bounced quite significantly from the 200-day EMA, so it is interesting to see that we are failing at the first sign of serious trouble. That does not necessarily mean that we will break down from here, but it certainly shows that it is likely that we would get a little bit of a pullback. On the other hand, if we were to break above the top of the 7100 level, then it is likely that the market could go much higher, reaching towards the recent highs and then looking towards the 7300 level. The FTSE 100 is going to continue to move based upon risk appetite and the British economy in general.
The market is likely to roll over and go looking towards the 50-day EMA initially, but if we break down below there then I would anticipate a move down to the 6900 level, even down to the 200-day EMA. This is a market that I think will continue to see a lot of volatility, but a lot of questions will be answered if we get anywhere near the 7100 level. This is a market that I think will continue to hear a lot of questions as the whole risk appetite situation continues to be fluid, with the Delta variant closing down various parts of the global economy and the currency markets rocking back and forth. Having said that, the simplest explanation for exhaustion might be that we have bounced too hard in a too-short amount of time. Either way, pay close attention to that 7100 level.
