1st June 2009

There is no doubt that the FTSE 250 has pulled out of its Downtrend nosedive quicker and more positively than any of the UK or US Stock Markets. It’s bigger sister, the FTSE 100 index, and particularly the Wall Street indices, the DJIA and the S&P 500 are, as yet, nowhere near as positive looking. The smaller Nasdaq 100 is though now ahead of the game and is displaying quite positive signals that it wants to push on upward.

In terms of a return to a proper ‘bull’ market (i.e. to a ‘Stage 2′ Uptrend) there is though still someway to go and there could be a deal of heartache yet to be suffered by those who jump in too big and too soon. We say this because the present phase of the markets (a ‘Stage 1′ Basing phase) usually involves some uncertainty and wide swings up and down. These swings are caused by a lack of buying continuity as buyers look to take short term profits and sellers become predominant as they take advantage of the occasional improvement in prices to get out of long held positions.

So what should you do; what investments should you make? Well, we would suggest that you look at an anotomical answer – calculate the capital equivalent of your big toe and invest no more than that to begin with and then build your position slowly such that it only goes to knee high, at most hip high, until such time as we are able to confirm that a ‘Stage 2′ Uptrend has swung into life.