My own timing indicator, 13-day BTI is oversold (below -400). This timing indicator suggests the FTSE will bounce back in the next few days. When the indicator falls below -400 it means the index is oversold and in general there is a good chance the index will rally. The Top 20 Differential is not oversold but not far away, currently at -2.3%.
With no major news the index drifted lower yesterday, sentiment is bearish and there is a feeling that the Fed will raise rates in September. The economy is regaining momentum, and in Europe there are signs inflation is picking up. The worry is Greece and rising bond yields.
The FTSE has declined to a support area which is the area surrounding the 200-day moving average. The 200-day moving average is currently at 6748 and because the 13-day BTI is oversold, the area below 6748 becomes strong support. Another timing indicator, Top 20 Differential is near oversold, so we have many indicators pointing to a support.
Based on the wave count it does not look like the decline is in five waves, therefore we should see lower prices before we see a significant bounce. Yesterday’s decline to 6737 marks the bottom of wave (iii), however it’s also possible wave (iii) is not yet over in which case it will end slightly below that level. The next move should be a rally to 6840 for wave (iv) followed by a decline to 6650 for wave (v).
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