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FTSE 100 Oversold As Risks Remain

ByThierry Laduguie
Published 16/06/2015, 07:49
UK100
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The decline resumed yesterday, the FTSE dropped below last week’s low on fears of a Grexit. I am surprised the index is not trading significantly lower given that a Grexit is a near certainty. I think investors are not taking the situation seriously, we could see a big move down in the stock market if Greece leaves the euro. In this environment it is preferable to be short rather than long.

Yesterday’s economic data from the US was weak. The NY empire state manufacturing index and industrial production were both worse than expected. In the meantime the FTSE is oversold and a bounce is imminent. Both timing indicators, 13-day BTI and Top 20 Differential are oversold.

The FTSE is currently in a support area below the 200-day moving average. This moving average is an important support, in addition the 13-day BTI and Top 20 Differential are oversold. As a result the area below 6700 has become a very strong support. You don’t want to be short here, unless Greece defaults. That’s the risk right now.

In a normal situation we would go long from current levels but with a Grexit looming, the market could fall out of bed at any moment. Furthermore the wave count does not appear to be complete. If the market rallies it won’t be the start of a long advance but a short lived counter trend bounce. This move is wave iv (circle) on the chart. It would appear that there is a final move down to come, wave v (circle).

FTSE 100: 120 minute Chart

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