The FTSE closed up yesterday without any help from Wall Street as the US markets were closed for a holiday. When the S&P is closed the FTSE struggles to find direction. So today the action should resume, and it should be down.
Today’s Chinese imports are well below analysts estimates, and yesterday’s German industrial production was lower than expected. The focus remains on China where the economic data is weakening but for some reason the FTSE is firmer this morning. I am always wary when the market does not react to the fundamentals. The FTSE should be down today, anyway what we see in pre-open does not count, the real action will start after 8am.
Is sentiment about to turn bullish? For now the BTI and 34-day BTI are declining (bearish), and the 13-day BTI is no longer oversold. Nevertheless the market is near a low as indicated by the 34-day BTI. This indicator is at -390, a move below -400 would be bullish. When the indicator is below -400 (this could happen in the next few days), the odds favour a medium term rally, one that will last more than two weeks.
Based on the position of the 34-day BTI it is hard to believe that the FTSE will decline to 5600. It would require some major bearish news to push the index to that level in the next few days. 5900 is more likely and there is always a risk that the decline will stop above that level. For this reason we shall close our short positions this week. I have a feeling the FTSE will change direction and this is not confirmed by the pattern. But feelings are not always right, what you see is more likely to be right. How many times you had a feeling the market would do something when in fact it did the opposite?
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