FTSE100 Rally to new all time high

[Mercury]

Just to follow up on recent chat with @Caseynotes on the FTSE100, here are my thoughts:

After a solid period of Bearishness I believe the FTSE100 has rejoined the Indices pack (Nikkei as well) in a rush to new all time highs (Nasdaq just posted another in out of market trading).  My Weekly chart shows a wave 3-4 retrace (pink labels) and we have not yet seen a negative momentum divergence on the Weekly or Daily charts.  Zoomng into the Daily chart we can see a pair of parallel tram-line containing the Wave C of the retrace to W4 turn and a breakout of the upper line to set up a Long trade opportunity.  I believe the Wave 1-2 move was also contained within the tram-lines and the breakout forms a motive wave 3 that will carry for some time (Blue labels).  The strength of the breakout confirms this assessment for me.  I am waiting to see a flag formation within this wave 3, although it may be hard to spot as I believe FTSE100 has a long way to go to catch up on the US indices.

On the Hourly, as discussed recently elsewhere, I do see a Flag formation that has been broken to the upside with a nice short retest in the last couple of hours.  If this holds and the market turns up again we could be on for a rally to the magnet that is 8,000 on the FTSE100, which I believe we will see before the end (famous last words and all...)

Note: the above, and all my posts, are NOT tips or assertions but analysis for discussion purposes only so please do feel free to disagree but please do so with reasoning (even if it is just your gut feeling).  As traders we have to make our own decisions and blame only ourselves if we get it wrong!

 

[Caseynotes]

Interesting too that FTSE put in a bullish pin bar for the month (Sep) so will be looking for continuation higher from that technical perspective as well. But as ever the Brexit wheel of fortune can throw up uncertainty at any point as it has for an age now.

[Mercury]

On the Weekly I also see a triple Bear test and rejection of support zone in and around 7200.  On the Daily the second test was an excellent pin bar, then Elliot Wave theory kicks in to explain the third test as a 1-2 retrace on a strong rally move so all-in-all a strong Bullish case was building before the Tram-line breakout, which sealed the deal for me on a purely technical footing.

Regarding Brexit effects (if any), ask yourself how the FTSE100 has responded since the referendum?  In the immediate aftermath there was no end of people coming out in the media, pointing to a falling FTSE as evidence that the result was bad for the UK economy, where are these people now?  For me Brexit with be a classic study of confirmation bias when it comes to the economy in that people are (probably, can't say for sure of course...) using Brexit (and other things) to justify their emotional biases.  Anyway, perhaps a discussion for another thread...  For now I am content to ride the rally, assuming it continues (and exit for profit if it reverses), and look for the next move.

[Mercury]

Updated 1 hour chart this morning reveals an adjusted Pennant formation (drawing these things as they evolve is a process! Easy after the fact...).  This morning early opening price action looks to be bouncing off the lower area of the Pennant, coincident with the apex of the previous triangle (which is also W4 of the recent rally phase).  This is a common retrace level where the overall direction remains unchanged.

A break back up through the Pennant and ultimately of the recent highs confirms the rally remains strong and for the FTSE100 is only about 50% done.  A strong break through the Pennant to the down side negates that and suggests a more significant retrace in the offing.

Any views from anyone on the FTSE, please?