The FTSE 100 initially dropped a bit during the trading session on Thursday but continues to look above at the 7100 level as an area that could be crucial. The 7100 level of course is a psychologically important figure, but there are a couple of trendlines that are coming into fruition at the exact same place. For example, the bottom of the previous ascending channel that I have marked on the chart crosses just above, just as the horizontal support and resistance line at the 7100 level crosses. At this point, it is very likely that we are going to see some type of bigger reaction, and at this juncture I am simply waiting for the trigger candle to appear.
If we were to get a daily close above the 7100 level, then I think is likely that we are looking towards the 7200 level above. That is the most recent high, and of course we would be breaking above a significant resistance barrier to get there. On the other hand, if we were to turn around and show signs of exhaustion, then it is likely that we will go looking towards the 50 day EMA just below the 7000 level. Breaking down below that level could open up a much bigger move to the downside, perhaps reaching down towards the 6800 level.
All things been equal, this is a market that is going to continue to move right along with risk appetite around the world, which of course at this point in time continues to focus on things like the Delta variant, bond yields, and the idea of whether or not we are going to completely reopen again. There are a lot of noises around the world right now with government threatening shutdowns and vaccination passports, but at this point in time it still remains to be seen whether or not the free flow of goods will continue to be a feature of the markets.
I do recognize that the market will more than likely be noisy, and it is going to have to address this crossing of two major lines. If we can break above it, I think that would be an extraordinarily bullish sign, but I would also pay attention to the DAX and the US indices, because they could give us a bit of a “heads up” as to where this market goes.
