The FTSE dropped further, the index is now oversold on the 13-day BTI. This indicator shows that the index has fallen too far too fast, in general the index will bounce back so it’s a buy at current levels.
But the bounce should be short lived as the five-wave sequence down is not yet complete. As expected Greece failed to repay 1.6 billion euro to the IMF. I think the Greece news is now priced in and the next important event will be the referendum this weekend.
So next week we could see another stock market decline if the Greek people reject the bailout terms. Thereafter, well, it’s going to get messy in the banking sector, right now it is impossible to know how the collapse of Greek banks will affect European and American banks.
Greece is bust but this is not the only reason to be bearish on the stock market, there are other reasons. Over the years I have explained why the bull market would end. More recently I made a bearish call at the UK investor show in April, I was right.
On the chart the FTSE has declined in five waves, this move is wave iii (circle). If wave iii (circle) is over the FTSE will rally in the next few days to complete wave iv (circle). Then from an area near 6680 another wave down will start, it will be wave v (circle).