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FTSE 100: Downside potential as long as 5840 remains intact

After falling hard on Wednesday and violating the recently formatted support at 5700, the FTSE 100 remains on a cautious footing this morning. At the time of writing the market is just in the green at 5678 as it seems to be finding the 5654/67 area a bit of a struggle for now. With the technical indicators reversing down on the daily chart, the market looks set to get into consolidation, before further downside comes. As long as resistance at 5840 remains in place any rally that shows weakness could be seen as a good selling opportunity. A downward penetration of the 5581 level would validate the bearish scenario exposing the key support area at 5502. Only the upside breakout of 5840 could delay the bearish scenario. On the economic data front things are a little quiet with the EMU Merchandise Trend due for release this morning and the US Industrial Production later in the evening.

Dafni Serdari
Market Analyst
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