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The BTI, a proprietary sentiment indicator, turned up on 18 February and is still rising. A rising BTI is bullish and this contradicts the Elliott wave pattern. It is not clear why the BTI turned up prior to a major market decline but it could be because the market has been going sideways for nearly a month, giving investor hopes that the worst is over. Remember that falling stock markets bring pessimism whereby rising or sideways markets give investors confidence to buy.

I believe that the wave count on the chart below is right but we can not rule out a rally to higher levels before the next decline starts. A rising BTI accompanied by a negative 34-day BTI can be interpreted as a large counter trend bounce within a bear market.

Due to the bullish nature of the BTI, I thought the rally in the FTSE may carry on for longer, making the upward corrective pattern larger that previously thought. However, an important signal was given last night in the US. If it was a larger upward corrective pattern, the Dow Jones would have rallied further and above 12600. Instead, it closed down and today in pre-open it appears to be weakening further. This suggests that wave (c) is completed and prices will continue to decline until they reach an area near 12200 [wave (d)], see chart:

As you can expect, the declining Dow Jones will drag the FTSE lower today and as a result, the FTSE is unlikely to rally back to yesterday's top. This leaves the symmetrical triangle pattern [(a),(b),(c),(d),(e)] intact. Yesterday's high in the FTSE marks the top of wave (c), the next move should be a decline to 5750 [wave (d)]. The FTSE must not rally above the previous high of 6033 otherwise bullish sentiment would drive the market higher.

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