Market Overview: FTSE 100 Futures
The FTSE futures market had a failed High 1 buy in a tight trading range last month. We are likely always in short on the daily chart forming lower highs and working down to the March lows. The bulls have both longer and shorter-term trends on their sides. After such a strong rally in March we can expect buyers below bars and some sideways trading while we decide.
FTSE 100 Futures
The Monthly FTSE chart
- The FTSE 100 Monthly chart traded lower in April with a failed High 1 buy and small bear doji bar.
- The bulls see a 2-year broad bull channel constantly making new highs, and the tight trading range could be a final flag before a possible reversal.
- Bulls have been buying above the 20-bar moving average (MA) for over 15 months which means if we get down there, there are likely buyers below.
- The bears see a failed High 1 buy signal, in a 4-bar tight trading range, at the top of a much larger 2-year trading range. They saw the consecutive bull bars in November 2021 and December 2021 had no follow-through, so that is a sign of a possible buy setup.
- They see a potential decade-long bull trend line break during COVID and now the trend resumption back up to the prior highs where it’s possibly failing and setting up a major trend reversal (MTR). Currently, it is a lower high MTR.
- The range is small, whether it is a final flag or a tight trading range, it’s breakout mode. For the past 4 months, we have opened and closed within 100 points, regardless of the ranges in the tails.
- Remember 80% of breakouts fail, and failures can fail, so it’s not a good place for stop-entry traders.
- The bulls are scalping. We can see there are no swing buyers above bars, so we might need to come down lower to find them. 2 legs sideways to down would get back to the moving average where the math is better for bulls to swing.
- But the bears are scalping as well. March 2021 was too big to get a Low 1 sell, but we might trigger it in May.
- If they get a successful Low 1 sell at the top of a trading range, that is a reasonable short to test the prior tight trading range from the end of last year or the moving averages below.
- If the bulls can get an outside-up bar next month, the breakout could take them to a measured move into new all-time highs.
- While both sides are scalping it is more likely we go sideways to down while the market decides.
The Daily FTSE chart
- The FTSE 100 Daily chart was a bear bar closing on its low so next week we might gap down.
- Friday was a two-bar reversal with Thursday, although it did not quite trade below the low triggering a Low 1 sell so it is not as bearish as it could be.
- Tuesday and Wednesday formed an inside-inside (ii) reversal at the 100-day MA which the bulls bought.
- It traded slightly below the open last week, the bears getting 4 reasonably sized consecutive bear bars. We have not had 4 daily bear bars in a row for over 18 months so it was reasonable for bulls to enter, expecting it to be climactic. Perhaps it indicates the mood is shifting.
- For the bulls, it’s a 30-bar bull channel with a pullback to the MA. We said last week that because 24 of them were above the 20-day MA, bulls would buy the first gap bar and they did.
- For the bears, they expected 2 legs sideways to down after the bull channel. For the longer-term channel, they see this as the start of the 2nd leg, the first leg being in February. The target they are hoping for is the March lows.
- In the shorter term, they see last week’s leg down as the first of two moves from the April rally.
- Either way, they got a surprisingly strong bear breakout, 4 consecutive bear bars so we are likely always in short.
- Is it a pullback from a bull channel or a bear breakout? When you are confused, think trading range.
- Bulls want a higher low around April 27th, a possible double bottom buy signal. The trouble is that it is in the middle of a trading range. If they get it, we could have an expanding triangle breakout and trend resumption.
- The bulls might also get an inside bar Monday with a higher low and so that would be the second leg.
- Bears want a follow-through bear bar on Monday. Another set of consecutive bear bars would encourage bears to swing down to test the March 9th lows.
- Likely sideways to down with an inside bar on the weekly while traders decide.
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