Our ‘Stage’ analysis of 38 sectors of the FTSE 100 shows that a potential ‘bull’ market is in the offing. Of the 4 major stages that we use to identify the current dominant trend of the stock market the majority (28 in number) are in Stage 1 – the Basing or Accumulation trend. Then there are another 7 showing as in a Stage 2 – Uptrend. This leaves just 3 sectors languishing in Downtrend (Stage 4).
The effect of the preponderence in Stage 1 suggests that a ‘bull’ market is in prospect but is not yet in being. Thus, any buying of stocks should be tempered with the knowledge that share prices could fall again (shares in a Stage 1 phase always suffer greater volatilty and uncertainty than in a Stage 2 Uptrend phase, for example).
Do we think that the bottom of the stock market is in?
Yes we do; there is a lot of technical evidence to suggest that the market will not go lower than the lows that were put in, on both sides of the Atlantic, in March this year. But that does not mean that those levels could not be revisted (and so make a classic “W” shaped bottom) if the current slow improvement is not maintained. Neither does it mean that share prices have to rise, they don’t, they could simply move sideways – and with considerable volatility.
But what of those UK Market Sectors in Stage 1 Basing trend? Well, there are two of them that are showing early promise of a possible bull run? There is Personal Care and Household Goods -
(Click on chart to enlarge)
Having broken above the resistance at the (marked) level 1 at the 5100 level this index has pushed on upwards and also managed to poke its head above the next level of potential resistance at the 5800 level (marked No. 2) and has just recently fallen back to this level and managed to make a new, higher, low – a good ‘bull’ signal! If the level of support for this sector continues then it should now progress upwards to the next level of potential resistance at the 7200 level.
There will be a number of useful shares in this sector to look at with a view to buying for a useful profit.
The only other UK market sector worthy of note at the moment is the Information Technology Hardware sector -
Here, though the sector is hitting its head on the latest level of resistance at the 340 level, it will be worth watching as, if it manages to break above this level, and to stay above it, then it should reasonably happily pull upwards towards a test of the next major resistance level at the 400 level area.
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