This FTSE 100 rally could be a bull trap

When the FTSE 100 rally extends sharply as it has done recently, people get excited, they think a new bull trend is underway. People are driven by the market. The proportion of bulls is always at the highest at the end of the rally. The sharper the rally the greater the percentage of bulls.

So I am not surprised to see so many bulls. If you study Elliott wave analysis you may have a different view. The rally could be the last leg of a running flat or expanded flat [A,B,C].

FTSE 100 rally

After all the main trend is down, lower lows, lower highs. In a running flat or expanded flat wave B makes a new low and wave C ends below the top of wave A (running flat) or above the top of wave A (expanded flat). The top of wave A is at 7552.

If the pattern is a flat or expanded flat buying now is a bull trap. The FTSE will go down again.

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