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OPINION

Paving the way higher

Paving the way higher
January 9, 2013
Paving the way higher

Sideways periods in the markets are those that I find most frustrating. And that’s what the DAX and FTSE are currently in. While I confidently believe the larger trend in both to be upwards, they are currently going horizontally in advance of their next move higher. The risk here is acting too soon once the market appears to be getting back into gear. False breaks are very common in this scenario, and can easily prove to be costly if one trades prematurely. As such, I am waiting for clear signs of a strong move higher before trying to buy. The FTSE has the sexier chart of the two right now, although it is also close to a major obstacle in the form of its bull-market highs at 6107.

for analysis of some European markets.

COMMODITIES OUTLOOK

10.39

My belief that the Euro will survive in more or less its current form is not the same as saying that the single currency will not face further crises of confidence in the foreseeable future. In fact, I think it is probably only a matter of time before the next bout of serious fretting begins, be it over Greece, Spain, Italy or A.N. Other. The current weakness in EURUSD is just a foretaste of what to expect. However, I do not expect this episode to deteriorate too nastily. In fact, I would not be surprised to see a renewal of its rally since mid-November in the not-too-distant future. Copper could be an especially interesting way to play the next run-up in commodities, going by its present robustness.

for analysis of some leading commodities and EURUSD.

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WALL STREET OUTLOOK

13.45

Sentiment is bubbling up a bit among US pundits. The latest Investors Intelligence report puts the bullish advisors at 51.1% versus 23.4% bears. That’s a gap of 27.7%. When the gap reaches 30% it can spell trouble for a rally, especially once it has remained at such levels for many weeks. However, neither is applicable today. And, with money abundant and the indices far from overbought, the stage is well set for an extension of the recent rally.

A genuine rally tends to kick off in unequivocal style. A big, booming up-day would qualify here, whether as part of a swing-chart signal or not. I am looking to buy as soon as I get a reasonable cue to do so.

for analysis of some leading equity indices.