FTSE forecast

FTSE Short Term Forecast

Wednesday 24 June 2009

8.00am GMT

FTSE short term forecast: Down

First a rally to 4300, then a decline to 4050

Selling area: 4280 or higher

Stop loss: 4400

BTI: Down

34-day BTI: Positive

BTI: The BTI turned down on 15 June and is still declining. The BTI and the wave count are now pointing in the same direction, which is down. The indicator should continue to decline in the near term as the wave down unfolds. When the trend is down, we sell the rallies. One indicator that is still bullish is the 34-day BTI but this indicator gives the long term trend, not the short term. It is indicating a bull market, however, the 34-day is dropping fast and it could become negative in the next few days. A negative reading would signal a bear market. Tonight's interest rate decision in the US could move the markets, if so expect the FTSE to be affected tomorrow morning.

Elliott wave count: The FTSE failed to make new highs above 4520. The last rally to 4500 could be a truncated fifth wave as discussed yesterday or it could be wave ii (circle) as shown on the above chart or wave b (circle) of a downward zigzag. This alternate wave count is possible if we assume that the rally at the end of April is wave A of a long term triangle [A,B,C,D.E]. Wave A is over and wave B down is currently underway. In this scenario prices will return to and area near 3600 to complete wave B. In the near term the move down from the top of wave ii (circle) should be in five waves [(i),(ii),(iii),(iv),(v)]. We are still in the early part of wave (iii) down, an initial target is 4050. Prices may push to the 4300 level today which is a previous support so prices should encounter strong resistance at this level.

The S&P continues to decline in five waves, an indication that the trend is down. Wave (i) was in five waves and the latest decline to 888 is also in five waves (seen on the 15-minute chart). For this reason today we can expect a small bounce to the 910 level, it will be wave ii of the five-wave decline. The S&P could rally higher but prices should not return to the previous high [956].

What is the BTI (Bullish Trend Indicator)?

The BTI is a sentiment indicator used to assess the mood of investors. When the daily change in the BTI is down sentiment is bearish. When the daily change in the BTI is up sentiment is bullish. The BTI is used to assess the near term direction of the market and confirms the Elliott wave count.

The 34-day BTI is used to assess the main FTSE trend. When the 34-day BTI is positive we are in a bull market, when the 34-day BTI is negative we are in a bear market.

Bullish influence	Bearish influence
	Wave count
	US markets
	BTI
34-day BTI

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