The mood in the city is currently mixed. Last week it seemed that stocks were in short supply and the buyers were plentiful. The S&P hit new highs and we saw good gains in the DAX and FTSE. There has however been conflicting data this week out of the US with house prices falling but new home sales up. This has left ripples through the indices and the currency markets alike and now with the added tension of events in the Ukraine, the fundamental outlook suddenly does not look that great.
What does this look like on the technical charts?
If we take the FTSE we can see that after breaking the highs made in January (6885.30) that the market rejected further upward pressure and has dropped for 3 consecutive days. The RSI is dipping nicely from the overbought territory at 52.77 indicating that we have further to fall. We have some key down side levels for the FTSE to test before buyers return into the market that is a daily BOB level (break or bounce) at 6667.80 (a key pivot also) and the 50% retracement of the current up move at 6637.24 (red line). My thinking is that if you are currently short the indices and the FTSE in particular, stay short.
We have Merkel in London today and the issue of the UK rejecting the Euro or leaving the EU will rear its ugly head once more I feel. This could lead to further down moves in the stocks. WE have key jobs data out the US next Friday with the NFP, this could be very instrumental on the direction of the markets over the next few weeks. Key downside target in the FTSE 6637.24/6550.50 over the next 7 days.
Steve Ruffley CEO Tradermaker.com
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