FTSE 100 First Major Decline Is Nearing An End
Thierry Laduguie | Nov 21, 2017 12:24
The FTSE 100 made a new low below 7356, this move was followed by a powerful rally. The new low at 7350.3 suggests the decline is not yet complete. When a decline is in five waves and the markets makes a new low it means there is an extension in one of the waves. The extension could be in wave i inside wave (iii) as shown on the chart below.
On this chart we can clearly see four waves inside wave i, and wave (iii) is in five waves [i,ii,iii,iv,v]. Wave (iii) ended at 7357 on 15 November. The current rally looks like a complex upward corrective wave consisting of an expanded flat (a,b,c) to 7405 followed by wave x, followed by another zigzag (a,b,c). This consolidation above 7400 is probably the fourth wave of the five-wave sequence. This suggests there will be a final move down for the fith wave, so the decline is nearing an end. The 38% retracement of the third wave is at 7423, where the current rally could end.
The pound is still trading near the high of the range, the current rally is wave C of a triangle. GBP/USD hit 1.3280 yesterday, the decline should resume, the next move is wave D down to 1.3050. This decline is significant and it could push the FTSE higher. I say could because it’s not certain, if the S&P declines the FTSE will go down. What is clear is that we are not at the start of the FTSE decline, we are near the end so a declining pound could shorten the length of the last wave down.
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