One of the most prominent shorter-term cycles at work in the FTSE 100 index is one of around five weeks’ duration. This cycle is due to peak around 17 January. Given that the FTSE is currently around overbought levels on its daily chart, there is a clear risk of a top forming around this date. I am not especially perturbed, however, as the FTSE’s overboughtness is not generally shared by the other indices. Wall Street is not currently stretched, nor is the DAX. If these markets can extend their rally, as seems likely, I imagine the FTSE can too. I am therefore sticking to my bullish guns for now and looking to buy on recoveries from intraday dips. EURGBP, meanwhile, needs to come off quite a bit in order to create a fresh buying opportunity, in my view.
for analysis of some leading European markets.COMMODITIES OUTLOOK
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Gold and silver are not far from giving change-of-trend buy-signals on their swing-charts. While I would be more than willing to respect these signals in the near-term, I have my doubts as to whether this would mark the definitive end of their corrective phases, which have been ongoing since September and April 2011 respectively. To an extent, it does not matter. From a long-term investment perspective, I think these metals represent excellent buys at these levels. Aside from doing long positions in gold and silver, I am attracted to latching on to the recovery in Brent.
for analysis of some leading commodities and EURUSD.WALL STREET OUTLOOK
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Rallies tend to come to an end once an index has become overbought on a daily view at least once. In many cases, they become overbought and stay that way for quite some time. During the current rally, however, which I date as having begun on Wall Street in mid-November, none of the three main US indices has yet reached overbought levels, which I define as above 70% on the RSI. As such, I find it very hard to believe that the post-November move upwards has yet run its course. The present bout of weakness is therefore most likely another opportunity to position ourselves for further gains. I am still especially keen on buying a rally in the Dow.
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