FTSE 100 set for a significant pullback

FTSE 100

The FTSE 100 (daily chart) has continued its push higher along with other major global indices after having rebounded in early October precisely off a key uptrend support line extending back to the May 2012 low around 5225. That rebound also occurred just under the 6350 support area.

Since that time, the index has climbed above both the 50-day and 200-day moving averages to reach and breakout above key resistance levels at 6535 and 6665, before slightly surpassing its upside target around 6810. A high of 6819 was reached on 30 October before the index pulled back.

If recent upside momentum is subsequently able to continue this steeply bullish run, the primary price objective resides around the 6875 area, which represents the very long-term high that was reached in May. Very likely, however, the index is due for another significant pullback, in which case key support areas reside around the noted 6535 level and then the noted uptrend support line.

S&P 500

The S&P 500 (daily chart) hit an all-time high at 1778 on 30 October before pulling back slightly. This high was just short of its upside target at 1800.

The current highs come after a long-term bullish trend, but most recently on an accelerated year-long uptrend that connects lows from the November 2012 low at 1342. The pullback that occurred in late September and early October dipped slightly under that uptrend line, but quickly rebounded to hit successively higher highs within the past several weeks.

The index is currently well above both its 200-day and 50-day moving averages, and is showing signs of potential overbought exhaustion.

For any potential impending pullback or correction, key support resides around the 1646 level, which was the low of the last major pullback. The short-term upside objective remains around the 1800 level.