FTSE 100 - major correction ahead?

For the past year FTSE 100 price action has been trading inside a bearish rising wedge pattern following the March 2020 sell off. Price action has now completed its journey to resistance (look left) at the same time it has broken out of the wedge. The last time this occurred was in January 2020.

Currently, on the above 10-day chart, price action is meeting with strong resistance. Back in April 2015 this level resulted in a 20% correction. There’s no question about it, trading opportunities at this moment have entered a no mans land.

Is there a bullish outlook?

By definition the rising wedge is bearish and showing evidence of continuation. The majority of professional traders will not be ignoring this development, it is low risk with high probability of following through. However they can lead to false signals. For this to be one of them price action has to break through 7120 and confirm it as support. Until that happens…

Target? Closer to 5000 than 5500 with a high degree of probability.

Good luck!

WW

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Their she blows... must be Freedom day.

35% correction previously when price action broke out of this formation, will this time be different?

Comment:

Be careful. Many many 'buy the dip' traders came in to push price action back above 7000. This gave the impression the sell off was over. Nothing could be further from the facts of the chart. Look left.

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4 oscillators are now showing bearish divergence with price action on this 10-day chart. Look left.

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Pucker up.. numerous oscillators continue to show bearish divergence and Stochastic RSI just crossed down 80 on the 10-day chart.

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Imagine being invested in the FTSE 100, your portfolio is in the same place as it was in 2013. What a dog. By comparison the S&P 500 is up 200%.

Comment:

Can you believe the UK FTSE 100 is trading at the same place as it was 20 years ago back in December 1999?

In that time the:

S&P 500 is up 240%
Gold is up 600%
Dow Jones 250%
NASDAQ 100 up 290%
German stock index DAX 30 up 120%

FTSE 100 up 3% !!!

If an investor had bought £1,000 of the shares of all the companies on the FTSE 100 on January 31 2001 and sold them on July 31 of 2020, she or he would have lost £63.48, a price return of -6.3%, even before you take inflation into account. It tells you a lot about what a modern economy is not.

This is a 3-month chart below (30 years of data on that chart!). Always interesting to look up the big time frames as the year end approaches.

We can see a massive bearish rising wedge forming. They breakdown the majority of the time. 7540 is the magic number to invalidate this wedge. Otherwise a new lower high is printed with a target of around 4700.

Comment:

The index is currently trading in areas where previous significant corrections occurred. Look left.

On the 10-day chart below price action prints a significant bearish divergence with Stochastic RSI. Buckle up.

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Another cross down. Following a 40% increase the index has now printed a bearish cross on the 4-day chart. These crosses have never resulted in anything less than a 10% correction.

Comment:

This is a quarterly chart. A new candle is about to print. Currently it is a hammer candle pointing downwards. If indeed it prints like this come October 1st, well that’s not good.

6770 Level must hold. 23 years of support and resistance. If a candle body beings to print under this level towards the end of the year, it is ‘closed until further notice’ on the white cliffs of Dover.