S&P's halting progress
To see what I mean by this, compare the current rally in the S&P to those in late 2011 and early 2012. The indicator below the price action shows the running total of up-days out of 10. The move up since June has been notable for the few occasions where the index has risen more than six days out of 10. By contrast, previous moves up saw numerous winning streaks of more than 6 up-days.
Stop-go, 90s style
Is this a sign that the bull market is tiring, perhaps? A quick look back at the experience of recent decades suggests not. In the early 1990s, the S&P 500 advanced in exactly this stop-go fashion for a period of no less than three whole years. Rather than being the precursor to a top, however, this activity actually led to one of the greatest bull runs in modern times, between 1996 and 2000.
While stop-start bull phases may not be an omen of impending doom, they clearly present challenges for trading. It is more difficult to simply open a trade and then just let the upwards drift of the market carry you along. I prefer doing just that, although perhaps I am just lazy.
Another hazard of these conditions is the tendency for false signals to occur on the swing charts. That's exactly what we have seen in just the past few days. The S&P, DAX and Dow have all given change-of-trend sell signals, with only the FTSE holding out among the indices that I cover. I did not actually follow any of these signals, as I suspected them to be phoneys. But it still makes for a more confused picture.
FTSE's quadruple RSI test
My friend and fellow technician Zak Mir (www.zaks-ta) has spotted what he claims is an ultra-bullish signal for the FTSE 100. The index's relative strength index bounced four times off a line of support. "It cannot be emphasised just how bullish a quadruple-tested RSI support line is," he says. I don't entirely understand the logic of this signal, but I do know that Zak has a great record of calling big moves in the market.
FTSE coiling to go higher
In any event, he and I are on the same page when it comes to the direction of the FTSE. I think the UK is now entering another 'go' phase, which is likely to see it test 6000 very soon. The really big challenge will come at 6107 or so, the bull market highs to date. My call is that it will probably burst through that level, having spent so long consolidating below it.
The FTSE's action over the past year and more could well be classified as triangular. That is certainly the view of John Piper (www.johnpiper.info), the UK's leading Elliott Wave trader, with whom I recorded an excellent interview this week. As John points out, big triangles are like coiling springs: when the price breaks out a triangle, the move can be dramatic. You can watch our discussion of the Dow, DAX, FTSE gold and the pound here: bit.ly/RAhjSi
