The FTSE 100 initially tried to rally on Friday but then gave back gains to show signs of weakness. That being said, the market is likely to see the 50-day EMA offer a bit of interest, as we have offered support during the day at that level. We closed at the 7410 level, and that does suggest that perhaps we have further to go to the upside over the longer term. After all, when you look at this market you can see that we have been in an uptrend for a while and touched the “fair value” point on the overall channel that has been so important for quite some time.
If we do break down below the 50 day EMA, then it is likely that we will go looking towards the 7300 level. After that, we may have a significant amount of support near the 200 day EMA as well. This is a market that I think will continue to go higher but it will obviously be very noisy and difficult. We are in the midst of a bounce, but if we do continue to show signs of strength, the market could take out the 7550 level, which is a very important recent high and could open this market up to a bigger move.
If we do break down, it is really not until we get below the 7100 level that I would begi n to worry about the FTSE 100. After all, the British pound has been weakening lately, so it does give the idea of exports being cheaper for foreigners as a bit of a tailwind as well. Remember, that is a huge driver of where markets can go when it comes to stocks, and that is not any different if it is New York or London. In general, this is a market that I think will continue to see a lot of chop, but that is going to be true with most indices. In general, I think that the European indices are going to continue to go higher more likely than not, while the US indices are going to struggle, so you could make a bit of a spread trade between New York and London or Frankfurt. I look at dips as buying opportunities.
