Bogus Headlines and the FTSE

A few days back we noted that FTSE will be the index to watch. Needless to say today's weakness on the US markets was triggered by the FTSE.

Compared to this, look at the media headlines after today's crash on the DOW:
Dow Sinks 226 on Mortgage Market Worries

Headline for the crash on FTSE:
FTSE down on subprime lending woes, US market drop

The reality is that the FTSE was down almost 1% before the US markets opened. When the FTSE closed down 1.9% for the day, the DOW was down only 70 points. It was only towards the close of the day that the DOW plunged.

Watch the FTSE - it's been showing weakness for some time now. From what we can make out, for the last few days, the DOW follows the FTSE and tomorrow Asia(maybe excluding China) should follow the DOW.

Also take a look at the chart below. Previously, though the FTSE moved below the 50EMA, it managed to close very close to it and subsequenly recovered. However after today's plunge, it has blown past the 50EMA and the next support is the 200EMA with the 50EMA being the obvious resistance.

It's not a bull nor a bear but a Wolfe Wave!

Let's do a Wolfe Wave analysis on 3 indices - FTSE, S&P500 and BSE. This exercise will be split across 2 parts - the first part will cover the Wolfe Wave analysis in recent history. The second part will be applied on the possible scenarios that we can expect in the coming few weeks.

The Wolfe Wave:
In technical analysis, it is a naturally occurring trading pattern present in all financial markets. The pattern is composed of five waves showing supply and demand and a fight towards an equilibrium price. These patterns can develop over short- and long-term time frames such as minutes or weeks and are used to predict where a price is heading and when it will get there.

With that in mind, let's apply the Wolfe Wave to 3 Indices.

FTSE:



BSE:



S&P500: