Michael_Macdonald-XATSUK

FTSE to find difficulty maintaining levels above 7000

TVC:UKX   FTSE 100
FTSE             has bounced smartly from above the 6676.56 monthly low of 4 November, with prices now pressuring the 6956.70 retracement.

Extension to congestion around 7000 is highlighted from rising momentum studies, but any further gains are expected to prove difficult to maintain, as the Tension Indicator, (not shown), continues to weaken and investors maintain a cautious stance. A close above 7000, however, would improve sentiment and open up highs towards the critical 7129.83 high of October.

Support is raised to congestion around 6800, but a close below the 6615/76~ lows is needed to confirm continuation of the October bear trend and turn investors bearish once again.
everyone is dumbfounded by this rise.... what do you think of the current levels?
Reply
@VishalShah9,

Hello :) from the Head&Shoulders perspective, it kind of makes sense, in that the shoulder needs to be completed before prices correct lower. I think current levels are unsustainable - in fact global equities are looking toppish now - and a corrective pullback is becoming increasing more likely.

If you look at SPX v commodities, there are signs of asset rotation away from equities and into commodities, so as equities press higher, it looks like hedge funds will be reducing equity allocation. With Energy/Oil already outperforming, we could see funds moving into the depressed Precious Metals space, pushing Gold and Silver higher.

Ultimately, I think current equity levels are unsustainable, and a correction is due. Maybe the SPX will correct lower after Donald Trump is inaugurated - akin to "sell the fact"...

Mike
Reply
VishalShah9 Michael_Macdonald-XATSUK
@Michael_Macdonald-XATSUK, Thanks, neat explanation and I agree.. FTSE hasn't been this overbought for the long time. Perhaps manipulated by Oil and GBP decline. If you look at the ATR, it is the lowest since a while - indicating a correction is due. The sentiment remains bullish even at this all time high levels. Have to wait and see... Thanks for sharing your thoughts.
Reply
@VishalShah9,

No problem :) Another perspective from the global equity arena is geographical allocation.

If global equities are due a correction, which geographies are least affected? For example, if US stocks fall, will equity investors move their funds into European names, or Asia names?
Will the FTSE manage to outperform the SPX?
Will high liquidity Chinese names provide alpha?

Incidentally, whilst I'm cautious of equities in general, I have published examples of Consultation reports which highlight US names which I believe will provide returns in the coming months.
There are examples in Financials, Materials, Technology and Agriculture.

Mike
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