The FTSE 100 cash price hit a high of 6596 last Friday. Sentiment has turned bullish again, the BTI turned up on Friday. This indicator is now in line with the 34-day BTI. It is possible to have bullish sentiment during a counter trend rally, when this happens the rally can last longer than previously thought.
We don't need to look at the indicators to see that sentiment was bullish last week. Another disappointing job report lead to a strong rally in the S&P, the FTSE closed up too but is lagging the S&P. Normally a weak report should have produced a sell off. As I said before when sentiment is bullish investors will ignore bad news, for example the problems that caused the sell off in January are still there yet the market is now rallying. We can expect the FTSE to rally further but in the next few days a pull back is the more likely scenario. There are two possible wave counts in the near term:
The move up should end with a divergence on the MACD histogram. A divergence will exist when prices are higher but the MACD histogram is lower than 6. So far there is no divergence to report, so a move up later could end near resistance at 6625 and produce the divergence.
Alternatively the divergence could be delayed, in this case the FTSE will first a decline to key support at 6514, then rally to the 6620 area. To receive my latest view on the intraday/short term direction of the FTSE 100 click here.