The FTSE 100 fluctuated on Friday as we continue to see a lot of noisy behavior between two competing areas of interest. The 7190 level has been resistance, but at the same time the 7100 level underneath has been support. With this, the candlestick ended up being a bit of a shooting star, but it is in the middle of the cluster of trading anyway, so I think what we are looking at here is the market is trying to figure out whether it is going to break out or break down.
The market breaking above the 7200 level could open up a move towards the 7300 level, possibly even the 7500 level over the longer term. On the other hand, if we were to break down below the 7100 level that would be a very negative sign, but we also have the 50-day EMA coming into that same area to offer support as well. With this, I think that plenty of buyers could enter the market, but we need to see a little bit of value present itself before we put money to work. On the other hand, if we were to break above the 7200 level without pulling back, that would be an extraordinarily bullish sign. Either way, the FTSE looks as if it is ready to go higher ultimately, but we probably have some work to do in the meantime.
If we do break down below the 50-day EMA, and especially the 7000 level, the market is likely to go looking towards the uptrend line underneath. The 200-day EMA sits just below there as well, so this is a market that will continue to look at that as important. However, below the 7000 level, I would think it is worth a shot to start shorting. This is a market that should go higher over the longer term, but the question is whether or not we need to drop to find more support, or if can we simply turn around. I suspect that Monday will give us some answers, and by the end of the week we should see plenty of liquidity re-enter the marketplace as the holiday season is ending, and big banks start to put money back to work.
