Tuesday, 7 September 2010

14:43 BST - FTSE Update

Referring back to my post on 2nd September, the FTSE is looking today like it may now have made that wave up and over its previous high of 5418 I was looking for on both bullish and bearish counts (Please click here to see that post which shows my interpretation of the elliott wave position on FTSE - bullish and bearish).

Today, we've seen what looks like a nice 5 waves down from its recent high at 5459.40. The question now, if we have seen 5 waves down, is whether its a wave A or a wave 1. Obviously, we can't know for sure. We just have to wait and see how it moves back up and once it forms three waves back up, that could be a reasonable place to take a short. However, you'd want to be out above the high of the three waves (or, if your trading rules allow it, above the high at 5459.40).

Here's a view of the FTSE which shows why we may have seen at least a temporary top, aside from the elliott wave count - a confluence of gann fan resistance right at yesterday's high:

FTSE Daily price and time with gann fans:

The green and red fans are drawn with the 1x1 lines connecting the opposite corners of the time and price square (which is based on gann levels). The pink and black fans are drawn from one pivot high across another and from one pivot low across another. You can see that lines from three of the fans crossed at yesterday's high.

Here's another gann chart going back to the February low, showing what appears to be a 48 day cycle from low to high, high to low and now, low to potential high:

FTSE Daily price and time from February low:

Finally, some fibonacci stuff:

FTSE Daily retacement of April to July decline:

As you can see from the chart, in fibonacci terms, we've reached the 61.8% retracement of the decline from the April high - a good stopping point for a 2nd wave retracement if we're in the bearish count. 

Also (but not shown on the chart) the rally from the August low is .618 the length of the rally from the July low to the August high in terms of price, almost to the penny (61.8% would have been 5459.37). In terms of time, its just about .382 x the length of the July/August rally (.618 is the square root of .382).

Finally, as you can see, if you draw an upward pitchfork using the July low, the August high and the August low, FTSE's rally touched the median line of that fork and has backed off from it today. If you're rooting for the bearish count, you want to now see a quick dash for the lower line of the green fork in a move that takes FTSE down and through the median line of the downward blue fork.

Anything less than that, given that the bearish wave count would put FTSE in a 3rd wave down, would have to be cause for concern on the bear case.