Current Status of the Stock market

For the fifth consecutive week the FTSE 100 has failed in its attempt to get above the 5190 resistance level. This indicates a lack of interested buyers and tends to highlight the potential for a sudden sell off. Should buyers return with determination and the 5190 level be overcome then the index would be set for an eventual rise of some additional 600 or so points up to the 5770 level. But this cannot (and must not) be relied upon happening.

The FTSE 250 is also giving cause for concern. It is in an area of resistance at and between the 9153 and 9610 levels. Most worrying is the lack of any real trading volumes; this leaves the index open to an increase in selling which could cause a sudden drive South.

In the background to this are two other factors; the S&P 500 has struggled upwards and now only has some 20 or so points to go before testing the 1111/1122 levels of resistance. A negative result from a test of these levels could be the catalyst for a fall in the UK markets as well as the US. The other worry that we currently have is our Momentum Index – it is telling us that market reversal could be imminent.

All in therefore it remains, in our view, a time to be circumspect about how much you should be exposed to the equity markets. Although the word ‘prudence’ has become rather debased of late it should be exercised until the markets’ future trends are more clearly defined.