The FTSE 100 cash index tumbled this week. Its sole positive day was Monday, but from Tuesday onwards, it’s been in a free fall. The index accelerated to the downside after it exited the sideways range that contained the price action from the 24th of May until the 30th of August, and thus, we believe that the outlook is negative for now.
Today, it broke below the support (now turned into resistance) barrier of 7335, which in our view, has opened the path towards the 7195 hurdle, defined by the lows of the 16th and 17th of April. Another move below that barrier, could encourage the bears to target the 7110 area, marked by the inside swing peak of the 29th of March.
Looking at our daily oscillators, we see that the RSI fell below its 30 line and continues to point south, while the MACD lies below both its zero and trigger lines, pointing down as well. These indicators detect accelerating downside momentum and support the case for the index to continue drifting lower, at least towards the 7195 zone. That said, given that the fall appears overextended and that the RSI is already below 30, we would stay cautious of a possible corrective bounce after the price hits 7195, perhaps to test the 7335 area as a resistance this time.
But even if the index moves above 7335, we would still see a cautiously negative picture as the price would still be trading below 7490, the lower end of the aforementioned range. In order to abandon the bearish case, we would like to see a clear close back above 7490. Such a move would bring the index back within the range and could initially aim for the 7640 resistance. Another break above that barrier could set the stage for the upper bound of the range, at around 7790.
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