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OPINION

Still gas in the tank

Still gas in the tank
January 24, 2013
Still gas in the tank

Eighty-six per cent of clients at IG Index are short of the FTSE 100 right now, according to its Insight facility. (My thanks to reader Neil Schofield for bringing this reading to my attention.) I can understand the logic of being short at these levels, depending on one’s timeframe. After all, the FTSE is more overbought than it has been at any time since early 2011. And, I think people have become so used to seeing the index struggle that they may not fully believe in the impressive breakout that we’ve seen.

Overboughtness is never a reason in itself to go short, however. It is an amber light, rather than a red one. As such, I would be allowing for the index to squeeze a bit higher still right now. Sentiment among IG clients is somewhat less bearish (67% short) for the DAX, which is logical given that it is not nearly as overextended as the FTSE. I continue to look for longs in the FTSE for now, and in EURGBP.

for analysis of some leading European markets.

COMMODITIES OUTLOOK

09.31

Brent crude’s rally is beginning to shape up rather nicely. After a rickety start, it has been rising in much more confident fashion, and pulling back less aggressively. What is more, it has yet to become particularly stretched on the daily chart. In this sense, it has changed roles with copper. As such, I would now sooner be trying to buy the black stuff than the red metal. Another prospective burst higher in EURUSD supports the near-term case for commodities more generally. I am looking for longs.

for analysis of some leading commodities and EURUSD.

WALL STREET OUTLOOK

13.31

I didn’t see the Nasdaq’s Apple-inspired cascade coming yesterday, but then again, it didn’t matter. Technical analysis had already told me to leave this index alone, and that was my message in yesterday’s note.

I remain reasonably bullish on the other indices, especially the Dow. I am not concerned by their daily overbought readings, but the intraday overbought readings present more of a problem. A bit of a shakeout would help set up another buying opportunity here, in my eyes.

There’s been another substantial increase in the number of bulls according to the latest AAII data. Optimists among small investors now outnumber pessimists by a margin of more than 2-to-1. This isn’t helpful, but it isn’t a cause for imminent concern either.

Finally, my search for my future biographer is over. @bubbawake’s analysis of me on Twitter (@DominicPicarda) is the most insightful analysis of yours truly that I have read in ages:

@DominicPicarda You Sir are one of the sleazy sociopathic parasites that caused this current crisis! Devoid of Empathy. Empty!

for analysis of some leading Wall Street indices.

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