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FTSE 100 Unlikely To Return Above 7070

ByThierry Laduguie
Published 02/06/2015, 07:47
EUR/USD
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UK100
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US500
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Yesterday we saw mixed data, European manufacturing data was weak but in the US ISM manufacturing PMI was strong and construction spending surged. The S&P 500 closed up but the FTSE 100 closed down.

The debate continues as to when the Fed is going to raise rates. In the UK we have seen unusual behaviour in the blue chips, mining stocks in particular are very weak. This is not a positive sign. In Greece people are queuing to withdraw money, a run on the banks is gathering momentum.

What will happen to the Euro? That’s a good question, EUR/USD has been depressed for too long, perhaps the bad news is already priced in, in which case a Greek default would not greatly affect the Euro.

Because the blue chips are weak, my timing indicator, Top 20 Differential is near oversold. This condition normally occurs near a bottom. For this reason and if the FTSE continues to decline we could see some support below 6900.

After an initial rally yesterday morning, the FTSE resumed its decline and the pattern inside the decline is not clear. It looks like in five waves but there was a spike on 1 June, I am not sure how to interpret this move. If the current decline is in five waves, this move is the start of wave iii (circle) down. Wave ii (circle) ended at 7070, the current decline is the start of wave iii (circle) in five waves [(i),(ii),(iii),(iv),(v)].

If the trend has turned down as I suspect, the 55-period moving average currently at 7008 will become resistance. So a move back above 7008 would provide a selling opportunity.

FTSE 100: 120 min Chart

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