- The FTSE 100 plunged during early hours on Wednesday, only to see a violent turn around after the Bank of England announced that it was going to step in and start buying bonds to fight the spike in-year-olds that we have seen over the last couple of days.
- This is a big concern of the market, and you can see that traders went bullish midday, to turn around and form a massive hammer.
- Whether or not this hammer holds and continues to keep the market afloat is a completely different question, but now I think we’ve got a situation where the market would probably have to be looked at with suspicion.
I recognize that we did hang onto the 7000 level, and that of course is a psychological victory. If we bounce from here with any type of force whatsoever, it’s likely that the market will probably go looking to the 7200 level, which is where we had previously seen support and I would anticipate a certain amount of “market memory” starts to come into the picture at that juncture. If we break above there, then you start to look at the 200-Day EMA which just had the 50-Day EMA cross below it, forming the so-called “death cross.”
Looking for Signs of Exhaustion
The alternative of course is that we simply fall from here and break down below the hammer, which would be a very bearish move indeed. In that scenario, we almost certainly see the market test the 6800 level, and perhaps even lower than that. With this, I would be very bearish, and I would anticipate that the FTSE 100 could drop to the 6500 level.
More likely than not, what we have just seen is a bit of a relief rally, but I don’t necessarily think that it has changed anything. After all, they’re going to be buying bonds at the same time as raising rates, showing that the central bank is now starting to flail its arms wildly, and the illusion of control is probably about to get crushed. Because of this, much like a lot of currency pairs right now, I’m simply going to let it bounce and show signs of failure so that I can benefit from the first signs of exhaustion and ride the overall negative sentiment.
Ready to trade our Forex technical analysis? Here are the best Forex brokers to choose from.