The FTSE 100 has gapped higher to kick off the session on Thursday but did struggle a bit towards the top of the range, as we stopped right at the 7275 level. Nonetheless, we have recently bounced from the 50 day EMA, testing the 7200 level, and then finding value hunters. At this point, if we can break above the top of the candlestick for the trading session on Thursday, that would open up a move back to the 7400 level.
If we were to break down below the candlestick from the Wednesday session, then it is likely that we could go looking towards the 7000 handle underneath where the 200 day EMA hangs about. That should be the bottom of the overall trend, and it is likely that the market will respect that. Not only is it a large, round, psychologically significant figure, but the 200 day EMA will have a lot to do with how algorithms treat the market.
That being said, the market was to break down below there, then it is likely that we would see a massive selloff. At this point, if we go down to the 6800 level, that would be the next attempt to stabilize the market. Obviously, this would be a major “risk off move” in the FTSE 100, which is possible due to the fact that the Bank of England has also decided to raise interest rates in the face of the omicron variant rating through the United Kingdom. That being said, I do not think it is the end of the world, but it could kick off a little bit of shorting and selling pressure for the intermediate term. Furthermore, the market is also likely to be noisy anyway, as we are heading towards the end of the year when liquidity becomes a major issue.
Longer-term, I think the FTSE 100 continues to go higher, but if you squint, you can see that there is a bit of an up trending channel, which we are essentially in the middle of right now, meaning that the risk range is just as high to the upside as it is low to the downside. Longer-term though, I do like buying dips, and it would get aggressive to the upside if we can finally break above the 7400 level, because I believe that opens up the possible 7500 target.
