- The FTSE 100 rallied a bit during the trading session on Thursday, to reach above the 7600 level again.
- At this point, the market continues to see a lot of noisy behavior, and now threatens some type of major breakout.
- In fact, you can almost make an argument for the United Kingdom going into a recession, which should help stocks because people believe automatically that the Bank of England is going to do whatever it can to liquefy the markets.
- In other words, they are hoping for a handout in London.
Any pullback at this point in time, the market will more likely than not offer some type of value the people were willing to take advantage of, especially near the 7500 level. The 50-Day EMA sets right around the 7400 level and is rising, so therefore it is probably worth noting that the market will probably pay close attention to it. The area between there and the 200-Day EMA opens up the possibility of even more support, so ultimately, I think you got a situation where the markets will continue to find plenty of buyers.
Pay Attention to the Pound Sterling
Pay attention to the idea of what’s going on in the British pound, because quite frankly a lot of that will influence the stock markets as well. After all, the idea is that cheaper British pounds will lead to cheaper exports. That should in fact drive up profits, but at this point in time the most important thing to do is simply follow the market. If the market continues to rally from here, perhaps clearing the 7700 level, then I think we could go to the 8000 level over the next several trading weeks. On the other hand, that pullback should offer a buying opportunity but if we were to break down below the 200-Day EMA, it would be very negative.
In that scenario, we could see the FTSE 100 drop all the way down to the 7200 level, an area that had been imported previously. Anything below there could open up the floodgates, but quite frankly it looks like we have enough strength that it’s more likely than not we go to the upside. This will be especially interesting once we get the complete volume back, which I think start sometime next week based on historical norms.
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