On Friday stock markets closed down pressured by a downbeat German Ifo survey and renewed tensions in the Middle East. Tensions between the West and Russia are starting to have a negative impact on the German economy and things could get worse as European officials are planning further sanctions against Russia after the downing of the Malaysian plane. In Gaza the fighting continues but there is hope for a ceasefire. In addition disappointing earnings reports from Amazon and Visa added to the bearish tone. Amazon shares were down nearly ten percent.
The bulk of the earnings reports have been released and now is a time when the market is less likely to react to good news. That's because the good news is priced in. Investors tend to make their moves early during the earnings season, which means now the market is more likely to react to bad news rather than good news.
There is potential for the rally to continue in the short term but upside is limited, the FTSE 100 main resistance is near 6900 where I expect the next correction to start. The current move up in the FTSE is an impulse wave in five waves, this move is expected to end near 6900.