In our last FTSE Forecast report (16 Dec 2012) we commented that there was an increasing potential for the FTSE 100 to continue its upward move and to put in another attempt to breakout above the 6055/90 resistance area.
Well, it is now doing precisely that. It closed last week bang on 6090.
Now, and importantly, this latest attempt to break above the 6055/90 resistance area is the 5th such attempt. 5th attempts are usually followed by fast moves – in this case upwards if the breakout attempt is successful but hard downwards if it fails!
It is also worth noting that 5th attempts are usually (although not invariably) successful. So there is good reason to be cautiously optimistic that the FTSE may have more goodies in store for us.
FTSE Forecast (FTSE 100)
The current dominant trend of the FTSE 100 is an Uptrend and it is a positive sign that its MA has now turned to point upwards again. The slightly worrying feature is that this latest breakout attempt has been made on very low volume – it remains to be seen if the ‘bulls’ can continue to have it their way and achieve a distinct breakout once full market participation returns (next week).
The FTSE 250 shows what can happen when strong resistance is met. Breakout attempts can be frustrated and leave the market in a very precarious position. The FTSE 250 has so far failed to break above its 12,200 all-time-high despite trying very hard over the past 10 weeks or so.
The breakout attempt, which has been in process over the last several weeks, has stalled and created the possibility of a leaving a long-term triple top formation from which the index could now resile and fall steeply.
However, another attempt to break above 12,200 is likely as the FTSE 250’s dominant trend is still an Uptrend and, should it then succeed, the FTSE 250 then it should race upwards for a while.
So, as with its big sister index, we are left with positive signals for a continuing rise but also with the possibility of a sharp pull back. A difficult but not impossible market scenario in which to invest. The answer is to stay focused on the upside potential but to remain cautious by being less that fully invested and by keeping close watch on our stop-loss and profit-protection prices.
Over on Wall Street the S&P 500 continues to make heavy weather of its climb towards making a breakout attempt at its all-time-high at the 1564 level – as the long term chart shows -.
The S&P 500 –
There was a bit of a Santa rally but it was very last minute and rather muted. Nothing to shout about at all.
S&P 500 –
The dominant trend is still the Uptrend so the S&P should continue to push on up towards a test of the 1564 area. It doesn’t look as though it is going to be a fast or exciting ride though.
The DJIA isn’t helping much either. Slow and ponderous sums it up. It is wanting to stretch up towards a test of its all-time-high at 14,200 but it really is making heavy weather of it. As we observed two weeks ago it does look as though it is only going to be something of a grudging effort rather than a juicy run up.
Tech stocks too had a belated push upwards but nothing dramatic or trend changing. The Nasdaq 100 is finding resistance at the level of its MA and will need good support this coming week if it is to stay above it. Again, though, just now this is not a particularly exciting prospect.
Nasdaq 100 –
Across the Channel, the German DAX has had a good holiday period and has succeeded in breaking above the resistance created by its May’11 high at 7600 which, is likely to be followed now by a move up the scale as the index gathers itself towards test of the 8117 level of the 2007 triple high. Of all the market indices the German Dax is looking the strongest and most positive.
GERMAN DAX –
Even the battered CAC 40 in France managed to make a move upwards. However, it is not a market that is showing much promise and it is likely to continue to struggle, and take a long time, in its attempt to reach the 4316 level resistance.
FRENCH CAC 40 –
In Spain on the other hand the IBEX 35 has swung into an early phase of a new ‘stage 2’ Uptrend and, because of this, presents a ‘speculative buy’ opportunity. It looks likely to continue a run up to make a test for resistance at the 9040 level area –
SPAIN, IBEX 35 –
Staying with Europe; after all of its troubles Greece is beginning to look interesting as well –
GREECE General –
For only the third time in 5 years (since January 2008 in fact) the General index has pushed up above the level of its 30wk MA. The previous two times each ended in failure but the significant difference this time is the huge increase in volume associated with the area of the lows. It is a fact that such increases in volume are often an indication of the final low. With the price having been rising of late, it is certainly a sign that accumulation of stock has been taking place. Although it is a bit early to be jumping on board this possible Greek bandwagon it is, therefore, certainly worth considering as an early and speculative buy.
Other World Markets –
It could soon become a buy – but not until it has crossed above the resistance proffered by the 3300 level.
This market too could soon become of interest as a speculative buy. The index has recently managed to pull itself back above the level of its 30wk MA and this could augur the onset of a new ‘stage 2’ Uptrend. But it is not ready yet. Market accumulation needs to take place and the index needs to start making higher tops and bottoms. Again, though, worth watching.
HONG KONG –
The Hang Seng is in an Uptrend as its dominant trend and is heading up towards a test of the resistance at the 25,000 level. As such it represents a reasonable buy.
The Russian Industrial Index is still making lower tops and is below the level of the down trend line. It cannot be considered as offering any real potential until that pattern has changed.
The Indian BSE 30 index is rising nicely but, with possible resistance and a long-term third top formation possible at the 21,200 level there is limited scope for gain so it is best left out as a new buy at this stage. Should the index break above 21,200 then it could make some fast progress but, until it makes that breakout, it offers the risk of a sharp retracement back down from a third top.
The Bovespa is trying to swing back into an Uptrend but it has some way to go before it can be considered as a reasonable prospect as a buy. A new, higher, low forming over the level of the MA might be the signal required to indicate its potential to rise to test the resistance at the 24,900 level. It might be worth watching for that low.
Japan is still a ‘no-go’ area as it continues to move up and down in its ‘stage 1’ Accumulation trend. Not until there is a definite break of the index above the level of is MA, and the MA itself taking on a Northwards direction, can we consider this market as offering the sort of potential we need to see for a buy.
Please note that there will be no FTSE forecast report next weekend as I shall be travelling. The next FTSE Forecast report will be on the 20th January.
Alan Saunders, Chief Analyst, ShareHunter.com 6th January 2013