The Clouded View: How Much Steam Left In The FTSE?

In January the FTSE fell to a low of 5315 - not seen for over 2 years - but closed just above 5500. In March it made a revisit to this level, with a low of 5415 and closing below 5500 for a couple of days. Since then we have seen a slow but relentless drive upwards, with only a slight pause to break through the 6000 level. So is there much further to go?

In terms of day-trading this is a fairly academic question. I just look at the numbers and the indicators and, hopefully, hold my nerve. But there are people who like to hold on to at least one long-term (or medium-term) position and this gives me a chance to look at the daily chart in some detail. I also don't much care for predictions. The present is turbulent, the future cloudy - none of which makes for a clear strategy. However, just as in the case of ignoring the news but being aware of when it happens, this is a case of being prepared for the next bout of high altitude turbulence.

So as of writing the FTSE sits at 6350 and getting ready to open in a couple of hours. The Dow is struggling to keep its head above 13000 for the second time in a couple of weeks, but for the FTSE this is the first attack on the 6500 level, not seen since January when it greeted the new year by tumbling 1000 points in 3 weeks. Now 6500 is the obvious major resistance level but there is a bit of hard work needed to get there. Around 6400 we find the October 2007 low as well as the August high. On the downside the FTSE has not broken below its 30-day moving average since it rose above it nearly 2 months ago. That sits at 6160, with the 200DMA at 6100. Before hitting either of those the SAR is at 6225. The MACD is looking very flat despite the rally as the FTSE has been checking every support level before moving on to the next.

So, if you want a prediction, go ask a remote viewer. My own view is that we will see increased turbulence, whether we hit 6500 or not. A break downwards hitting the SAR may see the 200DMA tested. Depending on when this happens that gap between the SAR and 200DMA could be about 200 points. Not a bad profit for such a clouded view.

RM