After last Friday strong rally, the FTSE closed down yesterday. It seems the rally is running out of steam. Same thing in the S&P 500, I was expecting a rally near 2070, but the highest level yesterday was 2055 and the index closed down.
Today the indexes are lower in pre-open, it would appear that the counter trend rallies are complete. Beside the wave count, stock markets have limited upside in the next four weeks mainly as a result of the uncertainty surrounding the referendum in June. Fear of Brexit will keep investors on the sidelines. This means, and as we move into June, the sellers will outnumber the buyers and chances are the stock market will move down.
Yesterday the Prime Minister warned of a DIY recession if Britain leaves Europe. Whether he is right or not, his comments will not re-assure investors. In addition talks of higher interest rates in the US will add more pressure on stock markets. Therefore there is a good chance the high at 6216 will remain intact.
This level is the top of wave 2 of a five-wave decline. From that level the FTSE declined below the 55-period moving average (on the 90-min chart). The index is now back above the 55-period moving average. In a bear trend a move above the 55-period moving average is a sell signal, so the decline should resume. Alternatively wave 2 is not yet complete and there will be another move up above 6216 before the decline resume. That is because wave 2 retraced less than 50% of wave 1, in general a second wave retraces 50% or more of the first wave.
Trading Strategist Thierry Laduguie has had great success trading the FTSE 100 and options. Our members are up 1644 pts or +164% in the last 13 months. "FTSE 100 and options are the best markets to trade" he says. To become a member subscribe to Better Trader