Having reached our target 61 per cent Fibonacci retracement resistance at 3520, complete with a five-day flurry above here, the subsequent pull back has been fairly sharp. It has retraced half of the previous rally, corrected the overbought situation, while keeping moving averages bullish. Volume has matched that on the way up. Historical volatility, while picking up, remains in the lower half of this year’s range. Over the next few weeks, we expect another interim base to form, probably between 3,400 and 3,350, because of the combination of cloud and retracement support, plus the potential for the candles of 26 days ago to stem the lagging line’s fall. Beware of thin markets though.

Nicole Elliott is a technical analyst