A very interesting turn of events for the FTSE 100 last week and a very intriguing week ahead of us taking into consideration the current state of the London index. Just when it seemed that the FTSE had gained a firm foothold above the 7,000 points last week and was preparing to build on that to attack the 7,200 points’ highs a steep sell-off on Friday complicated things.
The retreat to the 7,000 points’ floor just before the end of the week was a sudden development that caught many traders off guard as nothing hinted towards such a scenario. The focus was indeed on the UK domestic economy during the last session of the week due to the release of the employment-related figures but no market-moving numbers were released.
In fact the employment data showed a mild weakness for the labor market during the past month which would make for a good case for the FTSE to rise as BoE’s plans for raising rates are pushed further into the future. Nevertheless today the London benchmark index seems to attempt to take back its recent and sudden losses trading firmly between the 7,000 and 7,100 points levels.
My guess for the week ahead is that the FTSE will find it difficult to break out of these two important price levels, the 7,000 points’ support and the 7,100 points’ resistance barriers. This week doesn’t hold too many significant reports so it could make for an excellent opportunity for a consolidation attempt.
In cases like that the preferred tactic is always to “play the range”, to attempt to catch reversal attempts at the extremities of this consolidation range and make the best of it with quick trades with tight stops. I reckon it would take a significant development to change the market bias at this time and unless a surprise is on the cards we’re most likely in for a calm trading week with reduced volatility.
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