FTSE 100 retrace top or fresh all time highs?

[Mercury]

The FTSE 100 is less clear than the Nikkei/Dax as it could still make fresh all time highs.  The weekly chart suggests a retest of a tramline break has already occurred with the recent high but for this to hold the market would have to put in at most a double top next week.  Given the strength of the rally on Friday this seems unlikely.  The Daily chart shows 2 possible scenarios being an A-B-C retrace to wave 2 (purple), and this could still hold with a double top off the May 2015 high, OR a 1-5 motive wave culminating in a hit on the Monthly top resistance line around the 7200 mark (see monthly chart).  Again the latter is tracking to a hit on or after 18 Sept.

 



[Guest Rich88]

Friday 9th September the ftse broke the upward channel. I think we might possibly have a top in. I'm looking to sell any rallys under 6800. We should see resistance at 6760.

[Mercury]

That would fit with my general cross market analysis in terms of non US large Caps not making new all time highs .  However I do not yet believe we have seen the top of the US large Caps (or at least that is not yet confirmed, especially after the predictable strong rally today).  Therefore I would need to see a turn back down on US large Caps before I would trust that a Top has been hit elsewhere.  So far the US large Caps rallied off a Fib 38% (S&P -see chart below) and is now back at the potential H&S neck line.  A turn back down here would be in keeping with a Bearish move but given the RSI/Stochastic levels we cannot yet rule out a fresh final leg up.

 

I will be cautions until a clear confirmation or a clear signal that fresh all time highs on US caps are still ahead.

 

[Guest Kang]

I agreed with rich88, I am holding ftse, Dow Jones, & SP500 short below next 10% stop loss. Friday move was warning sign! Transforming bull to bear. Just My personal opinion.

[Guest Rich88]

Yes  strong rally in US yesterday, sent confusion everywhere. Practically untradable, I'd like to see a jump back to 6760 this morning then back down. US could obviously change this.



 

[Mercury]

I agree the FTSE100 wasn't tradable  and isn't just now except for holding at B/E possible long term Shorts at the 15 Aug high or the 4 Sept possible double top, however as said in previous post, I would be nervous about calling the top on any market until we see a confirmed end to the US large Caps.

 

I agree  that Friday's move was a precursor but not that it IS the end, after all the June 24 move down was much stronger and resulted in the "buy-the-dips" boys pilling in, which they have again.  Consensus is still for no rate rise by the Fed and other CBs are sitting on their hands ahead of FOMC next week so I see no reason yet to consider the market top is in, except a weak H&S formation that could so easily be false.

 

With respect to other markets the rally was somewhat predictable and tradable, I am currently Long and stop protected at BE on the Dax, S&P and Dow.  All of these markets came down to strong support and bounced back strongly.  Currently the US markets have hit Ice lines (support/resistance off a chartist pattern - double tops or H&S in this case) and are retracing from them in what would normally be seen as a classic confirmation of the Bearish move (and it still could be).  However the nature of the price action and other indicators across multiple time frames suggests to me that we are not done with the US bull just yet so I will be ultra cautious until either another lower low than Friday's low (Bearish) or a break back above the ice lines (bullish) signal is in.

 

See Dax chart for illustration of the bounce:  It hit a strong Weekly Chart Fib level plus a parallel tramline with RSI/Stochastic over sold.  You will see similar set ups in all the US markets.

 



[Mercury]

I should add that it is eminently possible for the FTSE100 to drop a little further and then rally so my new lower lows comment was based on US large Caps rather than FTSE or Dax.  See attached FTSE chart for illustration.

 



[donaldprice]

I think this is more likely, as I see ourselfs currently in W5 of C at present. Therefore 6630 level is a possible area to watch strong area of support + 61% fib level

[Mercury]

That certainly fits  but you can also make a 1-5 in the wave ending on Friday so either scenario is on the table.  With the strength of yesterdays US move My bias is for bullish action after a retrace but the FTSE is a bit more unpredictable just now and with a bunch of UK data about to come out I can't see a credible trade here.

[donaldprice]

Hi Mercury, this is true, hence why I took a long position moments ago, with a tight stop loss. Just I case that we have finished our retracement.

[Mercury]

Yeah the Dow just hit a Fib 38%, the Dax hit the 50 but FTSE hit 76%.  I just don't see that much upside to the FTSE and the others are more bullish so for me I'm only trading US large Caps Long and even then very carefully as I do believe upside will be limited.

[Mercury]

SO far so good regarding a FTSE100 retrace scenario with a 1-5 down and now a small 1-5 up (short time frame charts) followed by a small dip and rally.  If we get a strong move up from here then I would suggest the recent bearish move has been a retrace of the up trend with another leg up to go for the market top (at least on US large Caps, others still look like large time frame retraces).

 

I cannot fully rule out that the bearish move was a wave 1 down in preparation for a bigger fall but its form seems more like and A-B-C retrace to me, as do all the other stock indices.

 



[Guest Rich88]

If we don't take 6710, then I think we will turn down again 6630.

[donaldprice]

Interesting pattern on the FTSE at the W5 count of WC. Not 100% but does appear that we may have an ending diagonal, which could evidently prove that upside is on its way. As long as the .618% is not violated or the diagonal is not broken out to the downside, then I would most likely await for the completion of this pattern.



[Mercury]

You could be right  no question but as always there is an alternative scenario (other than the Big One has started , Sell! Sell! Sell! - which I do not yet believe...),

 

There is an EWT case for the bottom of this move to be already done at the top of the support zone.  If we get a small 1-5 completion (see chart) followed by a retrace and turn then the rally would be on.  How far and whether we will see a fresh High is another days work.  You can see similar but different structured set ups on the US markets and check out the Nasdaq, how about that for strength in the face of a sell off?

 



[donaldprice]

True True Mercury, what is good for traders over that last few weeks, is that we have a small taste, of what is to come, if rates go up and QE finishes. This is why the trading plan for me would be to get long on this trade. But I would want to see this triangle break first to the upside or complete is possible W-5 of c scenario.

[Mercury]

That's fair enough  either way I am waiting for the US markets to open.  If it is all about the USD then it is all about the S&P too.  I favour trading the US if you want to go long and tracking Europe & Japan for retrace.

[Mercury]

FTSE 100 is coming up on critical Resistance zone made by 3 previous failed attempts with the all time high not far above.  A break through here sets up the next critical point being a turn before the all time high or a breakout above that zone.  With US large Caps also at critical points it will be an interesting few days to see whether the potential head & shoulders works or a new top becomes manifest.

 



[Mercury]

Interesting move today, FTSE100 climbs closer to moment of truth while GBP drops through the prior post Brexit lows.  Even if we do get a new all time high the upper Triangle line may still hold for the market top.  There are both EWT counts and classic chartist formations that support an end point to this rally nearby and Key oscillator indicators are in over bought territory with a strong Neg Mom Div in play on the Daily (which I'd ideally like to see on the 4 Hourly and hourly in due course).

 

Overall, I can see a possible top out with a double top OR a small fresh all time high on the upper Triangle level.  If we see Neg Mom Div on 4 hourly or Hourly accompanying a clear 1-5 wave count then at a minimum a retrace is likely.  The alternative strong rally scenario is also still possible (red labels) but would need to see a break of the Daily Triangle for that in my opinion.

 

Looking at the 4 Hourly and hourly charts you can see the various chart formations of Flags and Pennants.  There are quite a few, which suggests to me that this rally is not a very confident one (i.e. many retraces) and this morning we may be witnessing a low volume rally (TBC).

 

 

[Mercury]

My question has now been answered with a fresh all time high on the FTSE100 yesterday.  The market hit and rebounded sharply from that high, suggesting to me a lack of long term conviction for the rally (at least just now).  The move eliminates the retrace scenario and leaves us looking for where the top might occur.  The ascending triangle (blue lines) remains intact and the convergence with the long term weekly resistance trendline (purple) offers an interesting possible top.  I can see a small scale 1-5 move leading up to this point with wave 3 top put in yesterday.  A retrace into a small scale wave 4 seems to be in progress, which could terminate either at 6950 level (Fib 50% of the wave 2-3 rally) or descend back towards the lower Triangle in an overlapping format (classic ending diagonal behaviour).  After this a rally back up to test the upper Triangle could bring up the end (unless yesterday was it of course...)

 

Additionally to the EWT and charting signals are strong Neg Mom Div and overbought RSI/Stochastic.  My ideal scenario is a retrace and final rally to complete a 1-5 up near the upper Triangle plus 3 indicators showing a bearish move and then a confirmation with a breakout form the lower Triangle line but cannot rule out the possibility that yesterday was the end.

 

Whether the Top is still to come or has come, a breakout from the lower Triangle line seems like a decent bet for a Short.  Will be interesting to follow this over the coming days into NFP and to cross check with other stock indices.