The ShareHunter Momentum Index (‘SMI’) has been a reliable indicator of past market tops. It is therefore of concern that the SMI has been flat since the beginning of September 2009 whilst the FTSE 100 and FTSE 250 have continued to rise.
This combination of a flat SMI and a rising market was last seen in the April to June period of 2007 when the sideways movement of the SMI was followed, several weeks later, by the top of the market and the start of the 2007-09 vicious ‘bear’ market collapse.
The chart below shows the FTSE 250 index from February 2007 to date with the lower red line being the Momentum Index; the sideways period is indicated by the red arrows; you can see how the market top followed.
So, unless the SMI turns upwards again in the coming week or two there is a strong likelihood that a major turn downwards in the London Stock Market will follow.
Click on the chart to enlarge -
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