The FTSE 100 rallied significantly on Wednesday to break above the 50-day EMA. The market also cleared the 7000 handle, which is a large, round, psychologically significant figure. The size of the candlestick also shows quite a bit of strength, so this is a very good sign for the FTSE 100, and one that it needed to have.
The market has plenty of support underneath, and as I had mentioned previously, the 6800 level is an area that has offered support multiple times, so I think it makes sense that we would see buyers taking advantage of it. Furthermore, we also have the 200-day EMA in that same area, as it has been grinding a bit higher for a while. Because of this, I think it makes perfect sense that we continue to bang around in this area and perhaps try to make a move towards the 7200 level. After all, the market has been in a bit of a consolidation area recently, and a lot of times, when you get consolidation like this, it leads to a continuation of the longer-term trend.
The FTSE 100 of course is also sensitive to risk appetite like many other indices are, so with that being the case it is very likely that the FTSE 100 will continue to move right along with risk appetite in general, so as long as there is more of a risk appetite move and mood out there, then the FTSE 100 will grind higher right along with the S&P 500, DAX, and other stock indices. On the other hand, if we do see a sudden concern abound global growth again, then the FTSE 100 will pull back. It remains to be seen whether or not that can happen with any type of certainty, but clearly the 6800 level is an area where the buyers come in and defend this index. As long as we are above there, I am a “buy on the dips” type of trader. If we break down below it, then I think 6500 would be very likely to be targeted next. In the meantime, it certainly looks as if a retest of the 7200 level seems more likely than not.
