Weekend wrap up, May 10th

Last week saw relentless rising action. The FTSE broke above the 4400 mark, crashing through the double top set in February in the 4330s without a slowdown.

In fact, for the past two weeks the FTSE has created a channel within the channel, as you can see in the chart below. While we remained within the main ascending channel, the index also found support and resistance inside a steeper and narrower rising channel (in bright purple). The FTSE eventually broke above the main rising channel, and closed the week slightly above it with an after hours price on Friday in the 4490s.


Momentum on both daily and weekly charts is still positive. The RSI reading on the daily is now above 70, and on the weekly it is well into the 50s: the strength of this rally is quite amazing, and last week there was no sight of heavy handed shorts, as the market only made minimal retraces down into which to buy. Whenever the market dipped down, into 50% retraces from the 24 hour lows to the highs, it most often did so outside market hours, in the evening or early morning.


In the above daily chart, note how last week's price action pushed itself again the upper Bollinger band: this highlights the strength of the trend upwards. There is also no sign of divergence on the momentum indicators.

Below is a weekly chart, were you can notice the positive momentum still in place. However, pay attention to three factors:

• Upper Bollinger value is around the 4600 mark: Bollinger bands often act as support and resistance.
• The 50% from the August high in the 5640s to the March lows is around the 4600 level.
  
• In January, our high was in the 4670s; we also hit a high the 4690s in early November, but recalling the volatility of the time I would discount that period and the levels made in those days.

We traded above the 4500 level this past week: if this market needs a high note on which to turn, there is a high probability it will occur anywhere between now and the 4600s given that the 4600s are a frequent occurence as stated above. If we rally past that, I doubt the FTSE could see past the 4800 to 5000 area, which marked support at various stages between July and September of 2008.