Expect a lot of chop and keep your position size small, as it is paramount in these times.

The FTSE 100 rallied again on Tuesday but looks as if it is going to have quite a challenge ahead of it. The 7500 level begins a significant resistance barrier that extends past the 7600 level, so it is likely that we will see sellers come into this market given enough time. After all, the market has bounced rather drastically from the 7200 level, but it is also worth noting that equities across the planet are all over the place. With volatility levels as high as they are, it is difficult to imagine a scenario where owning stocks will be the easy way going forward. I do believe that it is more likely than not going to be a situation where we will have a washout coming.

With that being said, the 7600 level is an area that you need to pay close attention to because it is so heavily defended. If we were to break through to a fresh, new high, then it is possible that the FTSE 100 really starts to take off. There are a lot of traders out there willing to bet that the central banks will be much looser with their monetary policy than they have been suggesting, but that is a pipe dream as inflation has gotten so out of control that it is difficult to imagine a scenario where central banks can do anything but fight it.

The lack of global growth will weigh upon the markets as well, so that is most certainly something that you need to pay close attention to, as there are major headwinds facing most developed economies around the world. The market will be noisy, to say the least, and I do think that there is still going to be a significant amount of support near the 7200 level underneath. Because of this, it is more likely than not that we will see a selloff. At the first signs of exhaustion, I am perfectly comfortable shorting this market because we have such an obvious barrier above that if we were to break it, it would more likely than not have a lot of money flowing into the market and you could probably make your losses back. Regardless, expect a lot of chop and keep your position size small, as it is paramount in these times.

The markets will not change their attitude until the central banks step in and try to save everyone.

The FTSE 100 was all over the place Tuesday as we have broken below the 200-day EMA and the previous 24 hours. At this point, the market is trying to determine whether or not the 7200 level will offer enough support going forward, or if we are going to continue to drop from here.

Looking around the world, it is likely that we will have more selling than buying. This is not to say that we cannot have some type of relief rally, but this type of brutality typically has further to go as the market dropped 300 points a couple of days prior. If we do break above the highs for the session on Tuesday, then you can make an argument for an attempt to reach the 7380 level, which is the top of the gap in the futures market. After that, you then have the 7400 level, followed very quickly by the 50-day EMA which is roughly 30 points above there.

On the downside, if we break down below the bottom of the candlestick for the trading session on Tuesday, it is likely that we will threaten the 7100 level, perhaps even the 7000 level given enough time. This is a market that is going to continue to be negative overall, especially as we are expecting the United Kingdom to go into recession given enough time. That is probably the same for most economies around the world, and we are starting to see the stock markets reflect that. Because of this, it is more likely than not going to be a “sell on the rallies” type of situation, which is going to be the case not only for the FTSE 100, but everything else. Furthermore, the 200-day EMA is going to be a bit of a barrier in and of itself.

As far as buying is concerned, I do not have any real interest in doing that, as I think the overall bearishness will continue, as the dearth of the world’s problems is going nowhere. The markets will not change their attitude until the central banks step in and try to save everyone. We are not anywhere near seeing that quite yet and at this point supply chain disruptions are just too much for equity traders to look past.

The only thing you can count on is volatility, and that is going to be true with all stock markets, so be cautious about your position sizing.

The FTSE 100 gapped lower to kick off Tuesday but found enough strength near the 50-day EMA to turn around and close at the very highs of the day. This has been a very strong move, but at this point, it is obvious that we do not have an uptrend to deal with, as we recently had pulled back quite significantly from the 7600 level. That being said, we still have a lot of noise just above that will come into the picture, so I think it is going to be difficult to break above there.

The 50-day EMA underneath is sitting at the 7447 handle, and it looks as if it is trying to rise from there. The 50-day EMA could offer a bit of dynamic support, so pay close attention to that. If we do break down below there, then I think the 7300 level underneath could be targeted next. The 200-day EMA is in that general vicinity, so it will be interesting to see how that plays out. Given enough time, this is a market that I think will have to come to terms with whether or not the bullish pressure can continue, but quite frankly we may have just formed a massive double top. On the other hand, if we were to break above the 7600 level, it could show this market going much higher, as it would be a “busted double top.”

Sometimes, when a pattern like this fails, that ends up being a much bigger signal. Ultimately, if we can break above there, then it is likely that we will enter more of a “buy-and-hold” type of situation. On the other hand, if we were to break down below the 7300 level underneath, and by extension the 200-day EMA, the market is likely to fall apart and perhaps reach down to the 7000 handle. The 7000 handle has a certain amount of psychology attached to it, and I think a lot of people will be paying close attention to it.

The only thing you can count on is volatility, and that is going to be true with all stock markets, so be cautious about your position sizing. However, we do have a couple of levels mentioned previously that we could pay close attention to, so wait for your signal to appear.

I have no interest whatsoever in shorting this market until we break down below that moving average.

The FTSE 100 initially tried to rally during the day on Thursday but has run into a significant amount of resistance, right at an area that previously had shown it as well. The result was a significant breakdown that then sent the markets lower, reaching toward 7475. As an area that continues to be of interest, as the 7450 level had been both support and resistance recently. The market breaking through all of that could kick off a larger correction phase.

Keep in mind that the FTSE 100 is going to be heavily influenced by external markets, as risk appetite will run in the same general direction. The FTSE 100 has been very parabolic over the last couple of weeks, so a significant and sharp pullback would make quite a bit of sense. After all, sooner or later you need to acknowledge the existence of gravity.

The size of the candlestick is worth noting as well because it does completely engulfed and swallowed the previous candlestick. That is of course a very negative sign, so breaking down from here would make quite a bit of sense. On the other hand, if we turn around a break above the highs of the trading session on Thursday, that could kick off an attempt to recapture the 7600 level. Breaking above the 7600 level could be a major turn of events, as it would allow this market to go much higher.

Looking at this chart, at the very least one would think that a pullback makes sense due to the fact that we had gotten far ahead of ourselves. Any pullback could offer value, but I will wait for a pullback that shows signs of support on a daily candlestick to start trading this market. The last several candlesticks have all been very quiet as far as range is concerned, so it is worth noting that the candlestick for the Thursday session is much bigger than the previous seven or eight.

Ultimately, we could make a move towards the 50 Day EMA and still look relatively reasonably bullish. The market stain above that level is a very strong sign, and therefore I think would attract quite a bit of buying pressure. I have no interest whatsoever in shorting this market until we break down below that moving average.

While the FTSE 100 may do “less bad” than many other indices, the reality is that it does it necessarily mean that it will do well.

The FTSE 100 has rallied during the trading session on Wednesday to touch the 50 Day EMA before pulling back a bit. The 7300 level is basically where that is at, and I believe it is only a matter of time before the level tries to make some type of topping the market. Keep in mind that the FTSE 100 has bounced quite drastically, but it is also worth noting that we had a major breakout before then.

The rally breaking above the 200 Day EMA is an interesting move because it does suggest that we are going to try to go higher, but there is such a huge cluster just above, and of course, we have a lot of noise that will stand in the way of the market going higher. Furthermore, there are a lot of reasons out there to think that the FTSE 100 probably struggles, right along with many other markets. The global scenario right now is not one that screams growth, so it’s difficult to get bullish on any stock market at this point. I believe that the situation around the world will continue to make people very hesitant to buy stocks.

The United Kingdom is more likely than not going to attract a certain amount of money just due to the fact that the UK economy is much safer than some of its competitors, but that does not necessarily mean that you want to jump into the market right away. The candlestick for the trading session during the day was impressive, but quite frankly we have seen this happen before. We still have a lot of noise above and that is going to continue to be a major problem for the bulls.

On the downside, if we break down below the 7100 level, it is likely that we will continue to go much lower, perhaps reaching towards the 6800 level. I believe that given enough time, the FTSE needs to retest the lows, but how we get there is a completely different question. I do not really like the idea of buying stocks at the moment, because we should continue to see a global slowdown, which will have its effect on everything. While the FTSE 100 may do “less bad” than many other indices, the reality is that it does it necessarily mean that it will do well.