The FTSE 100 was all over the place Tuesday as we have broken below the 200-day EMA and the previous 24 hours. At this point, the market is trying to determine whether or not the 7200 level will offer enough support going forward, or if we are going to continue to drop from here.
Looking around the world, it is likely that we will have more selling than buying. This is not to say that we cannot have some type of relief rally, but this type of brutality typically has further to go as the market dropped 300 points a couple of days prior. If we do break above the highs for the session on Tuesday, then you can make an argument for an attempt to reach the 7380 level, which is the top of the gap in the futures market. After that, you then have the 7400 level, followed very quickly by the 50-day EMA which is roughly 30 points above there.
On the downside, if we break down below the bottom of the candlestick for the trading session on Tuesday, it is likely that we will threaten the 7100 level, perhaps even the 7000 level given enough time. This is a market that is going to continue to be negative overall, especially as we are expecting the United Kingdom to go into recession given enough time. That is probably the same for most economies around the world, and we are starting to see the stock markets reflect that. Because of this, it is more likely than not going to be a “sell on the rallies” type of situation, which is going to be the case not only for the FTSE 100, but everything else. Furthermore, the 200-day EMA is going to be a bit of a barrier in and of itself.
As far as buying is concerned, I do not have any real interest in doing that, as I think the overall bearishness will continue, as the dearth of the world’s problems is going nowhere. The markets will not change their attitude until the central banks step in and try to save everyone. We are not anywhere near seeing that quite yet and at this point supply chain disruptions are just too much for equity traders to look past.
