The 23.6% fib retracement of the rally from the Brexit referendum day low is 7054. Note that GBP/USD has already breached the 23.6% fib retracement (1.2640) hurdle of the Brexit sell-off.
Given the strong negative correlation between GBP/USD and FTSE100, it is safe to assume that the mining heavy index could slide to 7054 levels.
Thursday’s rebound from the head and shoulder neckline followed by rebound from the sub-50-DMA levels today suggests the bears may have run out of steam.
A daily close above the rising trend line hurdle of 7360 would open doors for revisit to record highs around 7450.
On the downside, only a break below H&S neckline would revive bearishness.
The mining-heavy index failed to cut through – resistance offered by the rising trend line drawn from Brexit referendum low and descending trend line drawn from Mar 21 high and Mar 30 high).
The failure to take out the key trend line hurdle and rejection at Jan 16 high of 7354 if followed by a break below 7321 would open doors for a sell-off to the head and...
The odds of the index dropping to the neckline support of 7260 are still intact. Yesterday's high market rejection at the blue trend line... The index needs to retake the larger rising trend line to abort bearish view
Failure in the range of 7380-7400 on Thursday if followed by a close below the support offered by the rising trend line drawn from June 24 low would open doors for a drop to the head and shoulder neckline support around 7260 levels. The bearish pattern on the RSI suggests potential for a breach of the trend line support today.
Treasury yields hovering near one-month lows indicates the recovery in the FTSE100 and other risk assets is likely to be a dead cat bounce.
The daily RSI on the FTSE 100 chart shows a bearish breakdown from the channel formation.
Furthermore, we see a potential head and shoulder with neckline around 7260 levels.
A weak close today would establish a falling tops...
Failure to hold above the rising trend line (coming from June 24 low) followed by a daily close below the 50-DMA which seems to have topped out, would signal a major trend reversal and open doors for a sell-off to the magical 7000 figure.
50-DMA stands today at 7273
On the higher side, only a daily close above 7394 would revive bullishness and open up upside...
Despite the failure at the 50% Fib expansion level followed by a two-day drop the outlook remains bullish as the rising channel is intact.
The RSI has breached the channel to the downside, which is a slight cause of worry, although bulls have little to fear as long as rising channel on the price chart remains valid.
However, buyers are seen returning only after...
Friday’s break below rising trend line followed by failure to retake the same on Monday and Tuesday coupled with bearish 5-DMA and 10-DMA crossover suggests the index could test 50-DMA support of 7200.
On the higher side, only a daily close back above the rising trend line would revive bullish view.
Break above 7300 (upper end of the Bollinger band on 4-hour chart) would open doors for a cut through 7354 (record high) to a fresh record high of 7400 (upper end of the Bollinger band)
Bearish scenario: Failure to take out 7300 followed by a violation at the session low of 7268 could yield a sell-off to 7184 (rising trend line).
Monthly chart
The monthly RSI is well short of the overbought territory and also well short of the highs seen in 2007.
Thus, the index has plenty scope for a rally to 7354 (record highs) and beyond. Once 7354 is breached, the index could test the key psychological level of 7500.
The only cause of concern is the January’s bearish inverted hammer formation.
The rebound from 5-DMA coupled with the bullish 5-DMA and 10-DMA crossover and the daily MACD turning higher suggests the index is likely to test 7222 (weekly 5-MA).
A daily close above 7200 appears likely. That would confirm the pull back ended at the last week’s low of 7099 and would open doors for a re-test of record highs around 7350 levels.
For today I am looking at Fridays resistance and the daily pivot at 7175 to hold as support on any initial dip and then a rise towards the 7248 level. I am thinking we will get a dip back from here towards 7200 before we get a bit more a bullish push up over the next week or so. Certainly for today those are the two levels that are of immediate interest. Below...
The current rise looks like it has the potential to become three waves that might be the start of a rising wedge. C=A in the 7170 area. Of course it can also go straight to the 7280 target, but that looks less likely.
