While the FTSE 100 may do “less bad” than many other indices, the reality is that it does it necessarily mean that it will do well.
The FTSE 100 has rallied during the trading session on Wednesday to touch the 50 Day EMA before pulling back a bit. The 7300 level is basically where that is at, and I believe it is only a matter of time before the level tries to make some type of topping the market. Keep in mind that the FTSE 100 has bounced quite drastically, but it is also worth noting that we had a major breakout before then.
The rally breaking above the 200 Day EMA is an interesting move because it does suggest that we are going to try to go higher, but there is such a huge cluster just above, and of course, we have a lot of noise that will stand in the way of the market going higher. Furthermore, there are a lot of reasons out there to think that the FTSE 100 probably struggles, right along with many other markets. The global scenario right now is not one that screams growth, so it’s difficult to get bullish on any stock market at this point. I believe that the situation around the world will continue to make people very hesitant to buy stocks.
The United Kingdom is more likely than not going to attract a certain amount of money just due to the fact that the UK economy is much safer than some of its competitors, but that does not necessarily mean that you want to jump into the market right away. The candlestick for the trading session during the day was impressive, but quite frankly we have seen this happen before. We still have a lot of noise above and that is going to continue to be a major problem for the bulls.
On the downside, if we break down below the 7100 level, it is likely that we will continue to go much lower, perhaps reaching towards the 6800 level. I believe that given enough time, the FTSE needs to retest the lows, but how we get there is a completely different question. I do not really like the idea of buying stocks at the moment, because we should continue to see a global slowdown, which will have its effect on everything. While the FTSE 100 may do “less bad” than many other indices, the reality is that it does it necessarily mean that it will do well.