The bullish divergence between the FTSE 100 and the BTI (directional indicator) remains in place. If the index is in a third wave down the BTI should turn down to confirm the decline. We are still waiting for this to happen, as long as the bullish divergence remains in place there is a risk the index will rally to new highs.
On the bearish side, the uncertainty about the result of the Scottish referendum should keep a lid on the FTSE. The index is unlikely to rally to new highs before the result on Thursday. Others factors of a bearish nature this week are the rising tension in Iraq and Syria with the imminent launch of air strikes by coalition forces against Islamist militants, fear of a rate hike in the US, an end to quantitative easing in the US and weak data coming from China. China's factory output grew at the weakest pace in nearly six years. The bearish Chinese data prompted a sell off in metals, which means mining stocks will open lower today.
The question is: what will happen after the Scottish vote? A no vote would certainly push the FTSE higher, we could see a relief rally at the end of the week and this move could extend in the next few weeks to complete wave 5 on the chart.