The FTSE decline has finally begun

Everything points to a change of course in Britain's benchmark index, says John C Burford. And it seems the new trend has already started.

In last Wednesday's post("Decision time in the FTSE100 chart"), and in last Monday's post ("Have I found the perfect FTSE sell signal?"), I laid out a case that the FTSE 100 index was about to drop. This morning, I have solid evidence that the process has now started.

This is the monthly chart showing the six-year bull run off the 2009 lows. My six-year blue support line was breached back in August, but the market has now rallied back to it in a traditional kiss. If this kiss is genuine, the market should now start a scalded-cat bounce down and that outlook is right in line with my latest analysis.

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The form of the rally is an A-B-C three-wave affair, and these patterns are always counter the one larger trend which is down:

15-10-28-MWT-2

Last Monday, I also showed the FTSE on the hourly. I had a potentially complete five up and the market had just hit the major resistance line again on a momentum divergence. The odds were rapidly stacking up the rally high had been put in at the 6,490 level:

15-10-26-MWT-3

Then on Wednesday, I showed another hourly chart. The market had fallen back off my wave 5 high and was testing the pink line of support. I reckoned that if that line gave way , it was curtains for the rally.

15-10-28-MWT-1

I wrote: "That pink line is my line in the sand".

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My line in the sand has indeed been breached over the weekend. Incidentally, my chart has last week's data points missing in error, but my point remains.

15-11-2-MWT-4

In fact, the rally to the wave 5 high also contained a clue that it had run its course. Below is the chart I took on Friday. From the Thursday low, I have a complete five up along a nice tramline pair and on a momentum divergence. In fact, all the ingredients were there for me to forecast a big reversal was at hand.

15-11-2-MWT-5

All is now falling into place for me to expect the scalded-cat bounce down. To confirm the downtrend has started, I need to see a particular pattern trace out on the short-term chart and I will cover that in a future post.

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