The FTSE 100 turns lower and tries to balance above the 6,650 pivot point

In my last note to you last week I explained why I thought the FTSE 100 was due for a correction and what my target price for the end of the week was. Today as I take a look at my charts I am happy to see that my analysis was correct and that indeed the FTSE 100 after battling between investors’ hesitation and the Thanksgiving holiday midweek found its way down to the 6,650 points area.

Now if anyone takes a look at the technical outlook of the FTSE 100 this morning they will understand why I thought that the 6,650 points has to be considered a short-term pivot point. Moreover, the FTSE’s trading action the week that passed confirmed my assessment and highlights that area as an important level of focus for the London benchmark.

The 6,650 points area was the lowest point for the last upswing that drove the FTSE 100 above the 6,700 points, it was the point where the market got its last push higher before it lost all momentum and stalled its previous uptrend. This exact fact indicates why I believe that a successful break below that area will signal a complete reversal in the UK index.

I can’t be sure whether the stock market will go straight ahead and break beneath this area of resistance this week or whether we should expect a consolidation between the 6,650 and the 6,700 barriers. A number of important reports are expected to be released over the next 5 trading days so it will ultimately come down to how bullish these will prove to be.

As I mentioned last time investors are thinking that as we get near the end of the year maybe it’s high time to rebalance their portfolios against a less accommodative interest rate policy and that could mean more losses for the FTSE 100.

So my advice to you this week is tread carefully, the index is trying to balance on a very fragile technical level as the momentum is slowly but surely turning to the downside. It might not find the necessary push this week but you should be prepared if any new developments occur and tip it over.

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alpesh

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