The FTSE 100 rallied a bit on Wednesday to break above the 7000 handle. That being the case, the market is likely to continue to look at the 50-day EMA as a magnet for price, which currently sits just above the 7000 handle. Beyond that, if we can break above the 7100 level, then the market is likely to go towards the 7200 level, which was the top of the overall consolidation that we had been in for some time.
The FTSE 100 has to deal with the UK economy though, and there are a lot of concerns when it comes to petrol. Beyond that, you also have to wonder whether or not there is going to be a huge demand for British exports, due to the fact that the global situation is getting worse. The market breaking down below the last couple of days could open up a drive towards the 200-day EMA, which is where I would anticipate seeing quite a bit of support. Underneath there, then you have the 6800 level offering support as well.
That being said, if we were to turn around and break down below the 6800 level, then the market is likely to fall apart at that point. I do believe that there is going to be a lot of volatility in this market, just as we have seen multiple other places, so I think what we are seeing here is the possibility of the market trying to build up enough momentum to finally break out. We are essentially in the middle of this range so I think the biggest problem you will face will be the fact that we can go in either direction.
I would be very cautious about my position size in this market, as there is the high likelihood that we will see a lot of back-and-forth momentum. In general, you need to make sure that the market moves in your direction before adding to your position. The United Kingdom is an area where we are starting to see a lot of confusion and economic concern, so I would be a bit hesitant to go “all in” into a position anytime soon. That being said, if we did turn around and break above the 7200 level would be extraordinarily bullish.
