The FTSE has essentially been range-bound since late July, during which time it has been capped in the 5930 region. As the index once again approaches this region, it is worth considering why things should be anything different this time round.
First of all, seasonal factors are turning strongly in equities’ favour. What better time to stage a significant breakout than during the festive period? There is plenty of scope for the recent rally to extend, going by the unstretched daily momentum readings here. A resolution of the fiscal cliff issue in the US would surely be positive for equities everywhere, including for our own market, meanwhile. I am looking for further longs therefore.
Click here for analysis of some leading European markets.
I was not expecting the reversal in precious metals on Friday, and it has left me somewhat cautious. I happen to believe that EURUSD has further to run, and as such, that commodities, including gold and silver, will continue to strengthen. However, for now, I would sooner be taking part via copper, and to a lesser extent via Brent crude.
Click here for analysis of some leading commodities and EURUSD.
WALL STREET OUTLOOK
The 87-day cycle is one of the most powerful rhythms in the stock market and is identifiable on Wall Street going back more than a century. According to my interpretation of this critical cycle, US stocks made an important low in mid-November, and could continue to rally into the mid-January timeframe, therefore. That is not to say that stocks will necessarily top at that point. In strong uptrends, the phasing of the cycle often skews right-wards, i.e. tops occur later than they should.
I am still looking for longs in the main US indices.
Click here for analysis of Wall Street.
MORE FROM DOMINIC PICARDA...
Dominic Picarda is a Chartered Market Technician and has co-ordinated the IC's trading coverage since 2006. He is a regular speaker at trading and investment events and also holds the Chartered Financial Analyst qualification.
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