18 Sep Weekend FTSE Analysis for W/C 19th September 2011
As with most of the analysis I provide for any of the Indices, it will most likely apply to all of the major Indices unless specifically stated otherwise.
This particular analysis is a tough one to post because of course, I don’t like being wrong, yet practically all analysis I’ve read this weekend has a predominantly bearish short term outlook.
The risk with any current forecast lies within the fact that nobody really knows what FOMC holds and ultimately it’s effect on the markets over the coming week. What I can say is that most of the time, the charts already have it right in advance – my recent GBP:CHF analysis is one example of that.
Looking at FTSE daily chart and we have what many are calling a bear flag, but you’ll know that before any major move down (or up) the market likes to wrong-foot everyone and this usually occurs by breaking through a major resistance (or support) prior to the reversal. In this case, I see the current daily price action as a tightly coiled spring, with the higher lows showing that the coil is more likely to spring towards the upside. You could argue that we have an ascending triangle formation here.
Therefore, a convincing break of the red line depicted in this chart shows probability that price will attempt to achieve the circled area re-testing the level of the original break down:
Looking at the 4 hourly time frame, we have an area to watch in the form of the down trend line if the upside break does take place:
It doesn’t matter whether this move takes place or not, but if we see signs that it is taking place, we now have a plan of how we will trade it.