The index was struggling to push higher yesterday despite the falling pound. The index was trading sideways inside an impulse wave up yesterday which is not consistent with this pattern. Meanwhile my sentiment indicator has turned bearish.
Now that sentiment is bearish the index will struggle to push higher unless the S&P rallies to its target. I still expect a rally but with the news coming from North Korea not helping, it is hard to see markets rallying if the situation between the US and North Korea deteriorates. The North Korea foreign minister said that the US had declared war, probably because the US military is locating targets on the ground and from the air. The situation could escalate rapidly which means holding long positions in stocks is risky at the moment.
In the US the stock market was also dragged down by technology stocks. I suspect people will buy this dip again, this has been a regular pattern in the last few years, stocks don’t drop very far before they are bought. I believe the S&P will rally and this move will coincide with the impulse wave in the FTSE.
GBP/USD broke below a support line at 1.3450, this suggests the pound will continue to decline which is a bullish for the FTSE. With the help from the S&P and the pound, the FTSE could easily rally to 7340 in the short term.