The FTSE 100 went back and forth on Wednesday, as we are trying to keep above the 7200 level. The 7200 level had previously been significant resistance, and now it should be supportive due to the fact that it was a previous resistance barrier. Now that we have broken above there, it is likely that we will continue to see a bit of “market memory” come into the picture. Because of this, it is likely that there will be a continued push to the upside every time we pull back towards this area.
If we were to break down below the 7200 level, we could reenter the previous consolidation area, perhaps sending this market down to the 50 day EMA initially, the 7000 level after that, and then possibly even as low as the 200 day EMA. The previous consolidation actually extends all the way down to the 6800 level, but nonetheless this is a market that I think will continue to find plenty of buyers before we get anywhere near that level, as stock markets around the world continue to see upward momentum. The FTSE 100 will not be any different, as we have seen recently. We are a little extended at this point, but it is likely that any extension will more than likely continue going forward. A little bit of a pullback might be necessary for the market to continue going higher because momentum cannot last forever, but as we pull back, it is likely that we will find plenty of value hunters.
From a technical analysis point of view, we could be looking at a move towards the 7600 level, based upon the height of the previous consolidation. Because of this, the market is likely to continue seeing upward drafts, right along with other indices in the European theater. This is a market that I think simply follows right along with everybody else and as there are a lot of liquidity issues out there, and it makes sense that traders are getting away from the bond markets yet again and racing into these higher momentum play such as the FTSE 100, DAX, CAC, and even smaller markets like the IBEX.
