FTSE's intraday lurches
The frustration did get the better of me briefly at the start of this week. I had been calling for the markets to resume their uptrend and then jumped in as the FTSE 100 staged an intraday rally on 26 July. As the index gave up those gains at the start of this, I stopped myself out for a 66-point loss - or roughly 1 per cent away from my entry level. That's about the biggest stop I allow myself on day-trades.
In range-bound periods, the right approach is to go long as the price reverses from around the bottom of its range and take profits - and perhaps even go short - near the top. I used to be quite good at this once, but seem to have lost the knack in recent years. It demands more monitoring and better timing than the bread-and-butter trend-following I go in for the rest of the time.
FTSE's last bullish crossover
I could have avoided my FTSE mishap if I'd simply stuck to my own rules. Specifically, I should have waited for the 13-four-hourly exponential moving average (EMA) to cross above the 21-four-hourly EMA. This can provide better confirmation that a new rally has begun, rather than simply buying the first strong break higher. It's not foolproof, but it roots out some of the false signals.
My view remains that US and UK stocks are poised to head higher, once this summer lull concludes. Aside from the stability that the indices have shown up at these heights, the behaviour of two particular markets leaves me especially confident. The tech-laden Nasdaq 100 hit a fresh bull market peak on Tuesday 30 July, even as the S&P and Dow went nowhere. Tech leadership in a rally shows genuine conviction on the part of bulls, in my eyes.
Tech's multiyear highs
Over here, the FTSE 250 has also displayed strength. It gave a repeat buy signal on its swing chart on Tuesday 30 July. I lately shifted some of my Isa cash into this index, seeing it as an even more bullish set-up than that of the FTSE 100. I guess that the doomsters will draw attention to the potential bearish 'double-top' on its chart. For this pattern to be triggered, the mid-cap market would need to drop through its June lows at 13261, whereupon it could drop another 1700 points, according to the theory. That's all a bit futurological for my tastes. I'll believe it when I see it.
FTSE 250's unlikely top
As such, I prefer to respect the clear uptrend that's in force in both markets right now. In the case of the Nasdaq 100, the next objective of significance lies around 3152, being the monthly peak from November 1999. Above there are a couple of swing targets at 3195 and 3217. For the FTSE 250, I'm seeking new records of 15,000 and above. The other indices I cover should follow suit in due course.
