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Although Friday’s intraweek low was marked at 6421, the FTSE did manage to close the week in the midst of my former target band 6491-6556. This band is likely to continue to influence the index in the months ahead, and indeed provide some degree of short-term support. In my chart last week, I mentioned three Gann-theory percentages that would probably play a key role in the current correction. These three percentages measured falls of 6.25%, 8.33% and 12.5%, and were all derived from the recent high. Friday’s low at 6421 fulfilled the first of these percentages, and the fact that the index bounced from this level provides us with more insight into the future.
Ironically, the bounce from 6.25% lessens the chances of the next line (representing an 8.33% fall) providing much support. Instead, it increases the likelihood that the FTSE will ultimately fall by 12.5% from the recent high, to a level at 6008. Consequently, my target at 6293 is at risk of being lowered further. A break below 6437 is needed to trigger the next round of falls, however.
Recommendation: stay short. Target 6293 (with a bias to lower this to 6008, however).