Weekend wrap up, May 17th

At the beginning of this past week the FTSE ranged from the 4380s to the 4460s, finally breaking below the 4400 line and staying below it on Thursday and Friday.

We closed the week finding support between the 4300s and the 4330s, and forming a new descending channel (pink) but still within the original ascending channel (blue). To be noted, is that the double top in February also occured in the 4300s to 4330s.

Support was quite strong on both Thursday and Friday, and in the first half of this coming week it will be interesting to see which channel is confirmed: whether the ascending or descending one. A 50% to 61.8% retrace from Friday's high would occur in the 4370s and could still respect the descending trendline. However, in order to break the ascending channel, we need to close below the 4300 line by the middle of this week or so.



On Friday, we had some divergence forming on the hourly RSI: momentum however is still negative on all intraday charts from 1 hour to the 8 hour and also on daily charts (see below). If we get a buy signal on the hourly on Monday and we go above the 4370s it is something to pay attention to: the bulls are still buying the supports, while the bears still seem hurt from the recent rally.

Below the current levels we could find support in the 4270s (please also see the charts above, as this area seems to rest on the bottom trendline of the ascending channel), and below in the 4170s and around the 4100 mark. There are also a few minor support lines in between that could form, such as in the 4230s.

Momentum on the daily charts is still negative of course, and we seem to be respecting the 7 day weighted moving average, which has acted has resistance since Thursday morning: a significant close above it would put a dent in the bearish argument again. For now, this market seems set on a slow crawl down, and we need to penetrate supports faster in order to gain some downward momentum and for bears to enter the game with confidence.

Last week, I noted that the top of this move could come anywhere from Friday's closing levels to the 4600, but also warned of any further upside and a last area of resistance. We did not touch the upper Bollinger on the weekly nor got above the 4500 line this past week. I am maintaining my bearish bias in light of what the charts tell me, but we need to get some confirmations this week: as of Friday the bulls were still fighting to keep the ascending channel alive.