We continue to run with the inverse head-and-shoulders pattern the FTSE 100 broke free from last week, with the target remaining set at the January high of 7354. Bringing the hourly chart into perspective, a series of higher highs and higher lows is underway, but could come under fire with a drop below the low on Tuesday. This would bring the short-term trend sequence into question, and trade back down to the neckline of the H&S formation could be in order. At that juncture, while the pattern would still be in play, it would become a point where the market needs to hold or else a more aggressive decline might be get underway. There is additional support at the trend-line running up from the head of the pattern. It would require a break of both the neckline and trend-line for real concern from the long-side to set in.

But as long as we don’t see a lower low and a break of noted support levels, we continue to favor more upside within a developing upward channel. It might not be pretty, which is why (in consistent fashion) the preferred approach is to buy on dips as long as the trend sequence maintains its integrity. Chasing momentum in equity indices is often a losing endeavor, unless it’s U.S. indices recently which have gone on a rampage in recent sessions. But typically; pullbacks for buys, bounces for shorts tend to offer up the best risk/reward scenarios.

FTSE: Hourly