FTSE 100, Daily, Candle
Last week we felt that the FTSE was looking set to find support from the lower end of the trading range, red region, so the price action had been broadly in line, that was until today. Today we can see that once the market was called to open lower, on renewed eurozone concerns, there was no support until the market fell back to the 38.2% retracement level we have been looking at for some time now, green line. This area also coincides with the previous medium term bearish trend line, black line, which would now be expected to offer some support.
Often intraday moves of this kind, while grabbing the headlines, can do little actual technical damage. The graph above however that the RSI has broken its recent trend, lower red line and the FTSE has broken its strong trend, this in itself does not have to mean that the FTSE is now set to reverse this trend, but it does at least flag up that the strength of the market recovery off the 61.8% retracement support, lower green line, has run out of some of its initial momentum.
If the FTSE manages to close above the 38.2% level we would suspect that the bulls will have enough confidence to hang on for now. A break under the 5560 area in the coming days however would allow the renewed euro concerns to create additional selling pressure, and rapid moves to 5428 could be seen. So we do see traders very keen to see where the market closes today.
In summary then we do see the confidence of the near term bulls shaken on the selloff today, but for the moment the bearish argument has not been won. Active traders could be tempted to buy the market here looking for the underlying positive trend to continue, (albeit at a slower pace) but due to the RSI trend break we would feel the odds of success on this are not that favourable. On any break under 5560 the odds would greatly increase of a lower trading range setting up between 5300 and 5560.