The FTSE 100 rallied significantly during the trading session on Friday, closing towards the top of the range before the weekend. That is a very bullish sign, because it shows that traders are very comfortable with the idea of getting long of this index. At this point, I think that the market may go looking to target the 7200 level initially, and then break above there. The market tends to move in 200-point increments, so I think it makes sense that that would happen, and then eventually we would go looking towards the 7400 level.
To the downside, I believe that the 7000 level underneath will offer quite a bit of support, as it is a large, round, psychologically significant figure and an area where we have already seen a little bit of support. Beyond that, we also have the 50-day EMA racing towards that area, so it does make sense that it should offer plenty of support in the short term. Beyond that, we also have a nice uptrend line, so it all comes together quite nicely to offer a bit of a short-term “floor in the market.”
As the UK economy opens up, that should also see a lot of demand for UK companies domestically, and perhaps even globally. At this point, the market is likely to see more of a “buy on the dips” type of attitude, as the longer-term traders certainly seem to be looking to the upside. In fact, it is not until we break down below the uptrend line that I would be a seller, and at that point I think it is probably somewhat limited as central banks have shown their proclivity to protect markets. Having said that, one could say the biggest culprit of that is the Federal Reserve, but it has been seen around the world, so one would think that the Bank of England would not let the FTSE drop through the floor. In general, this is a market that I think continues to be choppy yet positive, as the overall attitude of stock markets around the world continue to look bullish, with perhaps the exception of China. Anticipate seeing a fresh high within the next couple of days.
