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Monday, May 13, 2013, Marketing Communication
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FTSE 100, Daily
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Last week we stayed bullish in the near term on the FTSE so the continues strength has come as no surprise.
On the chart above we continue to note the possible five wave impulse move higher from November 2012 to the recent highs (1-5 in red). From this move we can see the abc correction to the recent lows. Corrections often find support from the Wave 4 of the previous impulse. The buying from 6,200 in April found strong support from this area.
The price action has now moved up to fresh medium term highs, suggesting that the current price action is indeed the start of a new impulse move higher. The price action has moved through the tentative bearish trend line calculated from the March highs, red diagonal line. The FTSE 100 is trading above its 20 period moving average, and the RSI has broken the previous bearish trend line, black line, calculate from the bearish divergence described in February. As a result the technical picture remains solid.
On this chart we have drawn a new short term uptrend, blue line, The RSI has just moved towards overbought areas and buying of this nature tends not to last unabated, as a result we can the FTSE moving down to this bullish trend in the next few days. Short selling the index is most certainly not advised, as we continue to expect any such near term move to the trend support as bringing in fresh ‘buy on weakness’ interest.
As a result the technical picture remains solid. The near to medium term outlook on the FTSE 100 remains strong while this support holds. Leaving the expectation that a 'buy on weakness' sentiment will be the dominant story for the days ahead.
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FTSE 100, Weekly
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Last updated, March 4, 2013
The graph above throws up a possible medium term Elliott Wave count on the FTSE 100. We can see how from the 2009 lows there was a fairly clear impulse move higher, Red 1-5, followed by a simple abc correction. Another impulse move higher brought us up to the highs of 2011.
From these highs the FTSE appears to have set up a combination correction. Where a simple abc correction has been followed by an ascending triangle c wave, (ABCDE). This possible count is giving quite an optimistic upside target limit. As Wave 3 of an impulse cannot be the shortest wave within an impulse wave of higher degree. Wave 3 on this count is less than the height of Wave 1, so we know that Wave 5 cannot move further than the highest of Wave 3 without negating this potential count. This level is up at 7136. This is the height of Wave 3 projected onto the low of corrective Wave e.
So from an Elliott Wave perspective over this timescale there are bullish arguments for a move up through and beyond the all time highs, and that this strength could start to fail early in 2014. The highs of corrective waves b and d could be used as stop areas to negate this potential count, or the 2011 highs could be used for the more cautious.
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FTSE 100, Monthly
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Text last updated, May 12th, 2013
The monthly timescale naturally takes the long term view so the commentary in this section will only be updated as and when market events dictate. So regular readers of this report will only need to read the monthly and weekly sections on a relatively infrequent basis. However we include all the information to give new readers the full picture.
The monthly graph for the FTSE 100 quite clearly shows how the index posted an extremely powerful move into the end of the last century, first red line.
From the all time highs in the index at 6950 the FTSE slumped 50% to the 2003 lows. In hindsight we can see this move as an understandable and even justifiable re-examination of the strong gains posted in the previous 20-30 years. From 2009 the FTSE has posted a strong recovery and currently is posting moves up to its all time highs, moves already posted by the S&P 500, Dow Jones and DAX
Moves under the longer term trend line, far right red diagonal line, could trigger the start of a more significant retracement, as seen with the breaks lower in 2001 and 2008. While the breaks above the 2011 highs have opened up more optimistic long-term targets, with moves up to the all timehighs now seen as most likely, while the strong longer term trend holds.
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S&P 500 Graph, Quarterly
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The long term S&P monthly graph from 1930-2013 is uploaded to show how the broader US index index has now moved up to post fresh all time highs, following the trading from the TMT led highs posted in 2000 and matching the moves posted in recent weeks by the Dow Jones Industrials Average.
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Nikkei 225, Quarterly, Semi-log
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Enclosed above is a quarterly graph on the Nikkei. We include this for those readers who may simply assume that all major stock markets are in a perennial bull trend, with only temporary bearish aberrations. This shows that G7 nations can be, and indeed some have been, in major bearish trends for over 25 years.
This graph also details the spectacular percentage gains posted by the index over the past 12 months, moving from 8,000 to 14,000 in under 12 months, pulling the index up through the upper end of the long term bearish trading channel.
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