More potential downside ahead

We’ve seen a bounce in the UK100 (FTSE 100) in the final hours of trading on Monday but I’m far from convinced this changes the near-term outlook for the index.

UK100 (FTSE 100) 4-Hour Chart

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Firstly, the MACD and stochastic on the 4-hour chart don’t suggest there is enormous momentum behind the move, even if it is still early on.

Secondly, no key resistance levels have been broken. Of course, there’s plenty of time for this to happen but until it does, this is still a chart that looks vulnerable to the downside.

Should the downside materialize, the same levels apply, with 5,500 being the first test and 5,350 below looking an important level.

As far as the upside goes, small gains don’t change the outlook unless we see a clear break of 6,000. This would wipe out the previous highs and break the 200/233 simple moving average band in the process, at which point the outlook would look much more bullish.