As predicted the FTSE 100 is declining again after rising above 7200. The resistance area above 7200 remains in place, any attempt above that level will be rejected. As the decline unfolds the UK index will lead the way and other indexes will pullback. After a while the FTSE will find support and we should see a significant bounce. This is a sideways market, we sell high, we buy low.
It is also a tired market, the behaviour of the FTSE suggests waning momentum, these things happen after a long advance. This is why the index will struggles to move above 7200. Stock markets go sideways for various reasons.
Negative influence:
- A complete Elliott wave pattern in five waves, an overbought or near overbought 34-day BTI
- Slowing inflation characterised by falling commodity prices
- Falling bond yields associated with weakness in the banking sector and weak growth
- Fed looking to withdraw stimulus.
- Extreme valuations
Positive influence:
- Bullish sentiment, investors are complecent driven by a high level of optimism
- Fed put, the idea that any significant decline in the stock market will prompt the Fed to intervene
- TINA (there is no alternative) because bond yields and interest rates are near zero.
One moment investors focus on the positive, the next they focus on the negative. Markets are going nowhere.