The FTSE 100 rallied a bit on Wednesday to break above the 7100 level. The 7100 level will attract a certain amount of attention as it had previously been resistance. Now that we are above it, the market looks as if it is going to try to get towards the highs at the 7190 handle, and then perhaps break above the 7200 level. Breaking above that level then frees the market to go much higher, continuing the overall uptrend.
It is worth noting that the 50-day EMA has offered support recently, as we had pulled back to that level and then bounced right around the 7000 handle. With that being the case, the market is likely to continue seeing that as a bit of a short-term “floor in the market”, and a sign that we are going much higher. Ultimately, this is a market in which I think you should continue to buy on dips, because that is most equity markets are these days. Remember, when an index is formed, it is formed under the idea of the largest companies moving it more than anything else. In other words, they are designed to go higher over the longer term.
If we do break down below the 7000 level though, I might be willing to buy puts or something to that effect. I could short this market, but I would do so with a very small position size more than anything else. Ultimately, this is a market that I think continues to go from the lower left to the upper right, but you need to give it some time as we grind back and forth. I think it will move in a very choppy manner, so keep an eye on your position size and do not get overexposed too quickly.
I think at this point we are starting to form a bit of a bullish flag, so that also comes into the picture and allows for traders to perhaps get a bit of a “measuring stick” when it comes to the uptrend. The move would be for roughly 400 points, perhaps opening up the possibility of a move towards the psychologically important 7500 level. That obviously would be a big figure that a lot of people would be paying attention to.
