The FTSE 100 moved ahead strongly last week, confirming an underlying strength.
The ‘change direction’ effect of meeting with its 30wk Moving Average continued to work for all the major indices last week and particularly for the FTSE 100.
With the S&P 500 in process of a (so far successful) test of its important support/resistance level at 1122 all looks to be well with the uptrends of the various markets.
But – and it is a worrying ‘but’ – whereas most of the technical signals for the S&P, the FTSE 100 and 250 and the Dow and Nasdaq 100 are nearly all positive we do have one worrying niggle; a signal that is just not producing the same positive vibes. It is our Momentum Indicator (“MI”).
In the past the MI has been a reliable early indicator of a looming market top and so we do take cognisance of it. Our concern is that this indicator is just not partying in anything like the same way as the indices. In fact, at present, it is travelling in a different direction when it should, if all was well, be moving in the same direction as the indices. The MI is suggesting to mus that the indices may well be putting in a top by reversing direction soon.
From the two charts below you can quickly see how both the FTSE and the S&P have moved upwards during the last week or two whereas the MI has continued to drift sideways or downwards.
If the markets are to continue upwards we would expect to see the MI also moving upwards. But it is refusing so to do. The indices and the MI are moving in different directions. Not a good sign.
Of course all of this could change anfd the MI join the ‘buying’ party but it could also be the case that the party is nearly over.
So, what to do?
Answer; Do not get carried away with the current level of enthusiasm and overcommit to this market. And, where you are committed, keep a close eye on your exit stop prices and keep them up to date.
Individual market commentary and illustrative charts are available at http://www.sharehunter.com/news/market-review/
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