FTSE trading will become more volatile in the next 24 hours. The FTSE was weak yesterday, a combination of profit taking ahead of the general election, strong pound and declining oil prices dragged the FTSE lower. The S&P 500 was more or less unchanged. Today is polling day in the UK, we won’t know the results of the general election until in the early hours of Friday morning. The FTSE will be volatile tomorrow but the period of increased volatility will start today. Today we have some market moving events at 1.30pm with the ECB press conference and later with former FBI director James Comey’s testimony. Comey’s testimony could damage president Trump reputation, this comes after Trump fired Comey last month. Any more damaging revelations about Russia’s involvement in the US presidential election would send stock markets lower.
The most important news for the FTSE will be the results of the general election. This comes at a time when we should be short because the 34-day BTI is overbought and we have a completed Elliott wave pattern. When my indicators give a sell signal and we have some very important news like a general election, I prefer not to trade because this kind of news is more powerful than the wave count. If the pound collapses tomorrow the FTSE will rally to new highs. So it’s your choice, to remain short or not. Be aware that depending on who wins, the FTSE could jump to new highs and I have an alternate wave count for this scenario:
That was the previous wave count when the decline to 7389 on 18 May was labelled wave (a) of a running flat [(a),(b),(c)] inside wave iv (circle). In this scenario wave iv (circle) will end near 7450 and the next move is wave v (circle) to 7650. We could be in this pattern because the FTSE is pulling back to 7450 today. This scenario is not confirmed by the S&P. If the S&P is at the start of a multi week decline as I suspect, the FTSE should also be at the start of a decline. FTSE trading becomes more complicated when the S&P does not confirm the FTSE.
Important news like an election can push the market up by a large percentage, so it is possible that the FTSE will rally to 7650 tomorrow to complete wave v (circle), while the S&P remains at current levels. In this case both FTSE and S&P would be aligned, both would be at the top of a terminal pattern. Such a powerful rally would only be possible if the pound collapses. The pound would only collapse in the event of a Labour victory or a hung parliament. If Theresa May wins by a majority we could still get a relief rally but not a powerful one.
As you can see there is potential for a rally tomorrow therefore I will ignore my bearish indicators for now until I see where the market trades tomorrow.
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