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Sell the FTSE The economic news continues to disappoint investors. US durable goods orders fell, the third decline in a row, and US home sales came in lower than anticipated. New home sales are now at a 17-year low. All this points to a contracting economy, however, earnings are OK and the market is rallying. Perhaps analysts were too pessimistic about earnings and this is giving investors confidence to buy. The mood is upbeat but after a three-month rally in the FTSE 100, the 34-day BTI, a sentiment indicator, is still negative indicating a bear market. Therefore we must treat the current rally as a bear market rally.
Positive sentiment should continue to drive the market higher in the next few days but we are now approaching a turning point. Both FTSE 100 and Dow Jones are about to complete a complex upward correction labelled [w,x,y]. This upward move from January does not look impulsive (impulse waves up are associated with bull markets). This confirms what the 34-day BTI is telling me, the rally is probably a bear market rally. In the FTSE 100 the correction [wave y] should end near 6150-6180. Wave y which is the third and final leg of the upward correction is in five waves, of which the fourth wave ended at yesterday’s low [5951]. The next move up is currently underway, it is the final push to 6150-6180. By the end of next week the trend should be down. An initial target for FTSE is 5500. The unique timing analysis at e-yield has been developed by Thierry Laduguie, who has been working for investors since 2000. For more information, visit E-yield.co.uk |
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