Our Overall Market Ratings (‘OMRs’) for the FTSE 350 and the S&P 500 have hardly changed over the past few weeks. They continue to indicate a progression towards a new ‘bull’ market. However the OMRs of both these major markets must, for the time being, still be considered as indicating only a potential ‘bull’ market trend rather than an actual ‘bull’ market because of the split between the Stage 1 and the Stage 2 proportions - the majority of stocks being in Stage 1 trends.
Because of this split our concern remains the ever present possibility of a sharp retracement in prices; Stage 1 trends are always more volatile and susceptible to an increase of sellers over buyers on bad news. For the FTSE indices, for example, we dread to think what might happen if the UK’s credit rating is downgraded by Standard and Poors. This may be the catalyst that causes the index to fall back again and to develop a “W” (double bottom) pattern.
The major indices, on both sides of the Atlantic are best described as fragile, volatile and susceptible to shocks. Not the places then to be putting a lot of money or of hoping for an early and sustained recovery of previous losses.
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