Massive Bounce After Brutal Selloff

I think it is probably going to continue to be very difficult and volatile trading.

The FTSE 100 broke down rather significantly on Friday as the futures market got pounded from the start. The futures market drop down to the 7300 region before bouncing rather drastically, perhaps in a bid to stay in the consolidation area that we have been in for a while.

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Looking at the chart, you can see that we continue to look threatening, but it is probably worth noting that support did hold fairly well. If we can break down below the 7300 level, then it is likely that we will go much lower after initially wiping out the 200-day EMA underneath. If we were to break down below that level, then we will have a brutal selloff that should continue to be followed, perhaps allowing the FTSE 100 to drop down to the 7000 level. After all, one of the biggest problems that we are going to see in the FTSE 100 is the fact that the Bank of England has recently stated that they are going to anticipate a recession, and that suggests that the British economy is going to continue to struggle.

Looking at the chart, if we were to rally and take out the 7500 level, we may make another attempt to break out to the upside but I just do not see that being likely. If we were to see that happen, we could begin to build up massive pressure and perhaps even start to look at this market through the prism of an inverse head and shoulders. That seems to be very unlikely, but I suppose at this point in time anything is possible. If the Bank of England starts to loosen monetary policy, then it is possible we may see London traders celebrate. However, I think there are a lot of moving pieces out there that continue to put risk into the market, not only this one but pretty much every other market that I follow.

Pay close attention to other indices around the world because they all tend to be moving in the same general direction as of late. There are concerns about inflation, war, and shortages in the supply chain. Because of this, I think it is probably going to continue to be very difficult and volatile trading.