Yesterday’s heavy fall provides evidence of the higher-risk era I believe equity markets have entered, and justifies the cautious tone of my market updates since I introduced a neutral/sell bias last November. My recommendation remains to stay short.
The past week did not see the FTSE edge any closer to my original long-term target of 6920. Furthermore, it has not managed to stay above the isolated resistance at 6775. Both of these developments add further negativity, and build a stronger case to support my current sell argument. The recent twin peaks at 6867 now open the door to an ominous-looking triple-top on my three-day swing chart (see to the left on my main chart), the first ‘top’ being the 6876 peak established in May last year.
An 8.33% fall from these recent twin peaks would fulfill my current downside target of 6293. This target is isolated support, however, and some fine-tuning down to 6008 still remains a distinct possibility.
Recommendation: stay short, or sell further on any rise to 6920. Target 6293. Stop-losses can remain unchanged and be triggered only on momentum above 6975.