I am thinking that the current leg up might run out of steam in the 7545 to 7560 area and then we get a leg down toward 7415 before the year end rally. The FTSE is struggling to push higher and lagging the Dax and SP, cable is pegging it too. We have a rate rise (potentially but pretty likely 0.25% increase) and that might well see an initial spike higher in cable...
Hit the 7450 which was the target on the 7550 short. Ended up going a bit lower, hitting the lower support at 7430. Having now bounced to 7520, we might see a leg down to 7400 before a larger rally, but the bears need to break 7475 which is short term support.
Weekly chart
Rejection at 5-MA followed by a break below weekly low of 7344 is likely to yield a pull back to 7290 (161.8% Fib ext.). A weekly close below 7290 would signal the index has topped out.
Stops could be place above 7360 (very tight stop).
Head and shoulders breakdown
Rejection at 10-DMA
5-DMA & 10-DMA sloping downwards
Index likely to revisit 7300
Sell around 7365 Objective 7300 Stops above 7385
For today I am looking at resistance at 7385 where we have the Hull moving average on the 2 hour chart. This is looking decidedly bearish now after that drop yesterday, though has in fact been showing a bearish trend since Tuesday - hence my constant repeat of "sell the rallies" this week. Like a broken record! Above this resistance level then 7442 is the top of...
Tuesday's failure to hold above the falling trend line resistance followed by a drop to 7446 adds credence to the bearish price RSI divergence and points to further drop in the prices to 7380 (head and shoulders neckline).
A daily close below 7380 would indicate trend reversal and open doors for 7161 (target as per measured height method).
The erratic recovery from 7378 (June 15 low) signals the sell-off from the high of 7599 has run out of steam, although the bulls would still want to see a break above 7530 (falling trend line) before betting on fresh record highs.
On the downside, only a daily close below 7449 would revive the bearish view.
The positive action today may force one to question the breakdown seen over the past few days. however, in my opinion the positive move today is a bull trap. The index could be forcing out weak sellers. The doors remain open for a pull back to 7300.
Only a daily close above 7500 would signal the pull back has ended.
H&S breakdown looks like a done deal...is preceded by a bearish price RSI divergence and falling tops pattern.
The index ha topped out for the short-term and could extend losses to 7300 once the support at 7354 is breached.
The macro side of the story looks weak as well - Pound rallying, BOE tilting towards rate hike + political uncertainty
Break above the downward sloping trend line on the price chart and the RSI, coupled with the fact that the RSI is sloping upwards and i still short of the overbought territory suggests the index is likely to print record highs next week.
The current record high stands at 7447 levels.
Fundamental
GBP Monetary Policy Committee Vote and BOE Minutes May 11th, 2017
UK General Election June 8th, 2017.
Technical
Left shoulder and head formed. Watching for a reversal at 61.8% or left shoulder high: 7300 - 7350 range.
Although horizontal non sloping neckline signalling strong support at 7100 level.
Neckline to Head rally of 4.87%. Anticipating a...
Resistance at 7360 (falling trend line) if breached this week would open doors for 7500 levels. Pound is looking toppy in the short-term and could witness a pull back if the BOE on Thursday talks down inflation threat amid weak commodity prices.
A turn lower from 7360 area could end up in a larger head and shoulder formation with neckline at 7100 levels.
Failure to hold above the head and shoulders neckline followed by a violation at the critical support at 7197 (Apr 28 low) would open doors for a fresh round of sell-off to 7096.8 (Apr 20 low) levels.
On the higher side, only a daily close above 50-DMA level of 7306 would revive bullish view.
The daily chart shows - the index breached a smaller head and shoulders pattern on April 18. The neckline was retaken last week, but the index failed to sustain above the same. The neckline has acted as a strong resistance today as well.
A daily close below 7197 would open doors for revisit to 7100 levels (neckline of a bigger head and shoulders neckline).
On...
The retreat from the intraday high of 7134 indicates upticks are being sold into. Moreover, the early gains were largely due to the 6% rally in iron ore prices, which is nothing but a technical correction. The metal has been on a one way losing streak for quite some time now.
Overall, the doors remain open for a drop to 7054 (23.6% fib and head and shoulders...
The 23.6% Fib retracement of the rally from Brexit referendum day low stands at 7054. The index has breached the head and shoulder neckline yesterday and as per the measured height method we get the downside target around 7059, which pretty much coincides with the 23.6% fib retracement level.
Looks like another 70 point sell-off is a done deal
