Expect a lot of chop and keep your position size small, as it is paramount in these times.
The FTSE 100 rallied again on Tuesday but looks as if it is going to have quite a challenge ahead of it. The 7500 level begins a significant resistance barrier that extends past the 7600 level, so it is likely that we will see sellers come into this market given enough time. After all, the market has bounced rather drastically from the 7200 level, but it is also worth noting that equities across the planet are all over the place. With volatility levels as high as they are, it is difficult to imagine a scenario where owning stocks will be the easy way going forward. I do believe that it is more likely than not going to be a situation where we will have a washout coming.
With that being said, the 7600 level is an area that you need to pay close attention to because it is so heavily defended. If we were to break through to a fresh, new high, then it is possible that the FTSE 100 really starts to take off. There are a lot of traders out there willing to bet that the central banks will be much looser with their monetary policy than they have been suggesting, but that is a pipe dream as inflation has gotten so out of control that it is difficult to imagine a scenario where central banks can do anything but fight it.
The lack of global growth will weigh upon the markets as well, so that is most certainly something that you need to pay close attention to, as there are major headwinds facing most developed economies around the world. The market will be noisy, to say the least, and I do think that there is still going to be a significant amount of support near the 7200 level underneath. Because of this, it is more likely than not that we will see a selloff. At the first signs of exhaustion, I am perfectly comfortable shorting this market because we have such an obvious barrier above that if we were to break it, it would more likely than not have a lot of money flowing into the market and you could probably make your losses back. Regardless, expect a lot of chop and keep your position size small, as it is paramount in these times.