At this point, we are at the top of a very well-defined range, so I think the FTSE 100 pulling back makes the most sense of all.
The FTSE 100 shot higher to kick off Tuesday but gave back the gains to show less-than-stellar momentum. Because of this, it looks like we are going to continue to struggle in the same general vicinity we have been in for a while, so I think a pullback makes quite a bit of sense in this general vicinity. Ultimately, the market could see a move all the way down to the 7300 level just to reach the 200-day EMA.
Keep in mind that equities are a bit of a tricky fight at the moment, as we continue to see a lot of crosscurrents that will cause major problems. Nonetheless, most of these issues are negative, and I just don’t like equities. You could make an argument for a potential “inverted head and shoulders” on this chart, but I think that is a real stretch. It’s obvious to me that the 7700 level offers significant resistance, so if we were to break above there then it would obviously be very bullish. Until then, the market needs to prove itself.
The 50-day EMA is approaching the 7500 level, so that might be an area where people get involved in as well. The 7500 level has a certain amount of psychology attached to it, so it does make sense that we would see buyers flock to the market in that area if we get the right price action or fundamental news. Currently, it looks as if inflation is going to continue to be a major problem in the United Kingdom, so I just don’t see how the FTSE 100 takes off without some type of central-bank intervention.
At this point, traders are starting to focus on whether or not the Fed is going to save Wall Street, and I suspect that most other traders around the world are asking the same questions of their local central banks. At this point, we are at the top of a very well-defined range, so I think the FTSE 100 pulling back makes the most sense of all. Furthermore, if we did break out from here, I would be a little bit concerned due to the fact that we have seen such an overextended move during the last two weeks by the footsie.