FTSE100 Update - A stripped down look at lower highs being formed

So, after a few days of summer relief fear is back on the agenda today, the word Portugal being used a lot to describe the sell off. As we should know by now, when the market needs a reason for a sell off or profit taking it can usually find something. That's not to say that the wider macro issues are not important, but anyone following this blog will know by now that quite often the market turns a blind eye to news, good or bad, just as often as it will take it into account. Usually the news will serve its purpose, whatever the market sentiment is at the time. Often it is just plain old noise.

However, the charts are suggesting a sentiment change. The first of the two FTSE100 charts below is a stripped down version that shows that we seem to be in a wave down pattern. I'm not that proficient at Elliot waves or wave theory and whether they offer us a "scientific" approach to technical analysis, but anyone who looks at charts for any length of time cannot fail to see that markets and individual shares often move in waves, up and down. These waves will often have higher highs in an upward move and lower highs when falling.

The charts below are suggesting lower highs, the market unable or unwilling to sustain any bounce. A wave formation is also emerging that could see more downside as so far it looks like this is only the beginning of a third wave down. MACD also suggests that the daily chart is weakening to further downside. FTSE100 does have support levels below 6000. If the latest fall today continues watch out for what happens on the next bounce, as 6300 is the approximate lower high just achieved. Any bounce that does not clear that and sets another lower high suggests weakness and more downside.

The weekly and Monthly charts, not included here, also suggest weakness, although the latter still offers hope to bulls that the longer term upward trend is still in place.

It's also Summer, and markets can drift on low volume numbers.

For charts click below:

FTSE100 - Daily

FTSE100 - Daily