We continue to see resistance above 7050, the FTSE 100 rallied to 7067 yesterday before pulling back. The sharp pullback we saw occurred at a time when BoE governor Carney was speaking. I think investors concluded that the Bank of England won’t lower interest rates and further stimulus is unlikely.
This disappointment was followed by a soft earnings report from Apple (NASDAQ:AAPL) in after hours. The FTSE is now below 7000 which was a support area near the lower line of a rising wedge. The S&P 500 is really struggling to go up, as time passes the odds of an alternate wave count have increased significantly. Time is important because according to the pattern the S&P is in a third wave up, this means the rally should accelerate but so far this is not happening. As I said US investors are probably not active ahead of the presidential election. In this case the US index will continue to trade sideways until the second week of November.
The FTSE is weak for a different reason, it seems UK investors are taking money off the table in anticipation of bad news next year, also because they have made some good gains since June. I suspect the rally in the FTSE ended at 7129.8 and we are now at the start of a long term decline.
Yet sentiment is still bullish, which is not consistent with a decline. But this could change, the BTI nearly turned down two days ago. But failure to break above yesterday's high and continued weakness in the S&P does not inspire confidence in a rally. The rally is probably over.
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