Market Overview: FTSE 100 Futures
FTSE always in short at the bottom of a trading range. It could be a sell climax down to the big round number of 7000. The bulls see we are at the bottom of a trading range and will look to scale in short. The bears see we broke down from May 12th and want a measured move to 6700.
It’s a strong move down so we should trade a little lower next week where we can see the extent of the profit-taking and willingness for bears to hold swings. The bulls know the previous 14 times they bought here, they were very profitable.
FTSE 100 Futures
The Weekly FTSE chart
- The FTSE 100 futures was a bear surprise bar closing on its lows so we might gap down on Monday.
- It is the 3rd consecutive bear bar so we are always in short and the count might have restarted so traders would expect a small second leg.
- It is only the 2nd bar in 17 months to close completely below the 20-week moving average (MA) so it will be a low probability swing sell.
- The bulls see a trading range and a sell climax testing the March 7th lows. They see we have been in a trading range since January 2021 and bears have exited 14 times previously in this area, so they expect to scale in.
- The bulls expected 2 legs sideways to down after the strong April bull spike and the 2nd leg has ended. But it is a deep pullback and bulls might not want to buy 3 strong bear bars
- They see after a bull trend lasting 2 years, the broad bull channel will become a trading range at best for the bears, so it is still ok to buy low and sell high. Bears will hesitate to sell low.
- Bulls want a reversal bar here like in March and a double bottom for a High 1 buy or a High 2, second entry buy.
- Bears see a bear breakout, the lower high, major trend reversal after the wedge breakdown at the top of the trading range. They see we are at the bottom of the range again and want a breakout below for a measured move.
- The trouble is the location, bottom of a trading range. It’s more likely bears will scalp here, or at least take profits which will give us a tail like in March.
- Likely we move lower on Monday from the gap down and then we see if the bears are still swinging short, or profit taking leads us to a sideways to down week / inside bar.
- Markets have inertia. Its the first close below the 100-week MA in 18 months and both times previously it was bought up strongly, so you should assume since it has been a profitable strategy previously, traders will keep doing it until it fails.
The Daily FTSE chart
- The FTSE 100 on daily chart was a bear breakout below the May lows on Thursday and Friday finishing the week closing on its low with a big tail above so we might gap down on Monday.
- It closed at 7000 two days in a row, so it’s a micro double bottom (Micro DB) so it’s not yet as bearish as it could be.
- Last week we said traders expected a second leg down after such a strong sell-off from the top of the range and that remained true.
- The bulls see a big bear bar late in a trend as a sell climax. They see a strong sell-off back down pausing above prior lows and are looking for a double bottom.
- They know that no matter how bearish we are at the bottom of a trading range, the math favors buying.
- They see the support here with bears only willing to scalp below 7000 and not swing and will likely scale in buys lower as bears take profits.
- They want a similar pattern to March – a pause bar, Micro DB, High 1 buy.
- Something like December 2021 will do as well – inside bars / tight trading range, failed breakout below and then swing long.
- But is it different?
- It’s a trading range so they might be disappointed as well. They are concerned about the double top and breakout below May 12th and possible measured move.
- The bears see a trading range but a successful double top short sell and breakout below May 12th for a measured move and new lows.
- They know we are always in short and remained so all last week so it’s a tough buy for limit bulls.
- They see the lower low major trend reversal and expect 2 legs down and consider this still in the second leg.
- They see the pause Thursday and Friday at 7000 as an issue. They probably need a pause, a pullback here to confirm the breakdown from May and move lower to 6700, measured move target.
- Look left, whenever we had a strong bar into this area it reversed so we might need to go sideways, inside bars perhaps next week and confirm a breakout next week.
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