The Overall Market Rating (‘OMR’), by which we measure the market’s strength and dominant trend, for the FTSE 350 has not changed much over the past few weeks except to slowly increase. However, there has, over the last two weeks, been a material change in the number of stocks that have moved from their Basing ‘Stage 1′ trends and matured into ‘Stage 2′ Uptrends. This confirms a strongly based general market Uptrend so, whilst we expect occasional retracements (one such is due soon) the general movement should continue upwards.
There is an interesting 9-week cycle that has been operating on the FTSE 100, 250 and SmCap indices. Looking at the FTSE 100 particularly, the index rallied to the Sept’08 high from which it then fell for 9 weeks until it made the Mar’09 Low from which it then rallied for 9 weeks; then it drifted sideways and down for another 9 weeks until mid 10th July since when it has rallied again. And this current rally is now 7 weeks old.
So, maybe, the market is going to squeeze upwards for another two weeks. But don’t put your shirt on it as the FTSE 250 (also in the 7th week of the rally) is hitting its head on potentially strong resistance at the 8888 level. It is the FTSE 250 that has led the way – into downtrend; out of downtrend into Accumulation and then in to Uptrend so it is worth watching closely. If it manages to keep to the 9-week cycle then it might rise to the 9150 level before dropping off.
All the major markets have continued to move ahead. They all have some scope for further increase before having to test the strength of the next level of resistance. The FTSE 100 could yet move up another 250 points or so before having to test its (likely) strong resistance at the 5108 level area. The FTSE 250 is in much the same situation with scope of some 210 points or so more before it mets with its likely strong resistance at the 8888 level area.
And, of course, there is nothing to say that these markets won’t just sail up through these levels; although we doubt that will happen. The markets are due a retracement; those levels are of comparatively strong resistance; and there is the ever nearing 80 year cycle of the 1929 Wall Street crash and the other market similarities with 1929-34 that we highlighted in our recent bulletin.
And what of Wall Street? Well,the S&P 500 has some 90 or so points to go before it closes with its big resistance test and the DJIA has 800 points to go (but only 200 to a first level resistance). With October just five weeks away there is time yet to get some more ‘long’ trade profits under our belts before we really have to consider how to cope with a serious retracement.
BEWARE THE IDES OF…….OCTOBER 2009!!
A Review of the disturbing similarities between the 1929-34 stock market collapse and of 2007 -09. It provides indications as to how the stock market may move in 4th quarter 2009 and beyond and highlights the cyclical trends that may soon come into play on the UK stock market.
The Review is available, free of charge, on request to admin@sharehunter.com
There really are no significant changes worthy of note from the previous week. The markets have run out of steam – with such low volumes perhaps that should be of no surprise. There is scope for some price increases yet before heavy resistance is met but the markets are struggling to move upwards.
One thing that is of increasing interest, not to say concern, to us is some similarity of the markets movements with the market movements during and after the great crash of 1929. Given that reputable economists have likened the current macro economic scene to that of the Great Depression we feel it important to investigate these stock market similarities to see if it can help us decide what might be ahead of us in investment and trading terms.
We hope to have our report ready within the next few days
The markets continue to increase but on very low volumes, which is a source of concern that the current uptrends may not be sustained once the holiday period is over. We are also intrigued by some similarities that we note exist between the stock market movements over the last 2 years with the movements in the Dow Jones index during the 1929 – 1932 period.
Perhaps it shouldn’t be surprising that such similarities exist as our current economic situation has been likened to that of the ‘Great Depression’. We are currently studying the two stoack market periods for clues as to what movements we might now expect to occur in the FTSE and S&P indices over the coming year. We will report on all of this shortly.
At around the ‘80′ level our Overall Market Ratings (‘OMRs’) for the FTSE 350 and the S&P 500 clearly indicate that a new ‘bull’ market is in play. However, it must be noted that the OMRs of both these major markets are almost equally split between the Stage 1 and the Stage 2 trends. Because Stage 1 trends always tend to more volatile (than the more mature Stage 2 trend) our concern remains the ever present possibility of a sharp retracement in prices of the Stage 1 stocks.
This concern is strengthened by two facts: First, all of the major markets are now hitting their heads on overhead resistance. This may be quickly overcome but it is more likely to push prices back down, at least temporarily. Second, the volumes are low; normally this can be a positive sign (little or no selling to drive prices down) but being in the middle of a holiday period it may just be that most of the ‘bears’ are on the beach and not at their trading desks and a collapse in prices could be delayed until their return.
With the current ‘bull’ trends in play the most likely scenario we anticipate is a continuation of rising prices taking them up through the current resistance levels; this is likely to be accompanied by rampant claims in the press of recovery in stock market prices (and this will suck in even the more sanguine investor). Then the markets will go into sudden reverse and retrace back to current levels or below.
So, the message is analogous to the summer weather – enjoy the sunshine but keep your umbrella handy and don’t be banking on having too many barbeques!!
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