The FTSE 100 pulled back again during the trading session on Wednesday, only to turn around and show signs of life. By doing so, the market is pressing the 50-day EMA again, testing the bottom of the previous ascending triangle. Furthermore, the 6950 level is an area that might cause a little bit of noise, but if we can break above the 7000 handle, we would more than likely see the FTSE 100 regain its mojo and go higher.
Breaking above the 7100 level then clears the previous ascending triangle, and it simply suggests that the market would continue to go much higher, perhaps looking towards the all-time highs and then beyond. With that in mind, I think it is only a matter of time before the value hunters come in. However, if we were to turn around and take out the 200-day EMA underneath, that could break this market up and send it much lower.
Keep in mind that the FTSE is attached to the United Kingdom, so there is a certain amount of the “reopening trade” and the Delta variant coming into the picture, but there is also the possibility that as the United Kingdom reopens, money will flow into the stock market. As we are trading between the 50-day EMA and the 200-day EMA, I think it is likely at the very least we will see a lot of noisy behavior. With this, I think we are probably going to see more of a grind than anything else. That is not to say that we cannot have a bigger move, just that it may take a bit of time to get to where we are going.
For a bit of a “heads up”, pay attention to the risk appetite in general around the world and the FTSE 100 should follow right along with several other indices and currency markets. The DAX might lead the way in the European region, but the FTSE 100 could be a bit of a close second. The British pound is starting to strengthen a bit, so that may work against the idea of exports, but at the end of the day the British pound is still historically cheap.
