FTSE 100 Forecast: Pulls Back From Crucial 7200 Level
The FTSE 100 house tried to rally initially during the trading session on Wednesday but gave bank gain as we approached the 7200 level. The 7200 level was an area of support in the past, so a little bit of “market memory” could be coming into the picture.
It might be worth noting that the 200-Day EMA is sitting just above, and of course we are right around the 61.8% Fibonacci level as well. In other words, the “golden mean” could be coming into the picture. Regardless, I think there are a lot of moving pieces when it comes to not only the United Kingdom, but the global economy in general. I find it difficult to think that this market is suddenly going to take off, unless of course the Bank of England gets involved one way or the other. I do believe that they will eventually have to loosen monetary policy, but there’s also the possibility that the weakness of the economy may just be too much for stock markets to handle.
Looking for Signs of Negativity
- Breaking down below the 50-Day EMA opens the possibility of the FTSE 100 dropping down to the 7000 level, an area that is a large, round, psychologically significant figure but it’s also an area where we had seen support previously, during the middle of the summer.
- Breaking that, of course, opens the floodgates to the much lower levels, but at this point, I don’t think it’s very likely that we make that move easily.
- More likely than not, we will continue to see a lot of choppy sideways action, especially as we are grinding back and forth between the 50-Day EMA underneath and the 200-Day EMA above.
Eventually, we will break out from between these 2 moving averages, and then we could have a little bit of clarity. Keep in mind that stock markets are balancing on razor's edge these days, and it takes very little in the way of negative news that people freaking out. There are a lot of rumors about central banks coming to the rescue, but that’s only because we’ve been treated to 14 years of cheap money. Now that the markets must stand on their own 2 legs, it’ll be interesting to see how they all play out. At this point, it looks like the global economy is slowing down so I would be looking for signs of negativity.
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