FTSE 100 changes trend
In the course of the latest surge, the FTSE 100 has given a change-of-trend buy signal on its swing chart. It had gone into a downtrend at the start of October, but I never saw this as anything more than a technicality. This is even truer in the case of the FTSE 250, which re-entered an uptrend at the end of last week and has powered magnificently to a fresh record peak.
FTSE 250 fresh record
With further liquidity likely coming down the pipeline into the markets, I think the outlook remains good. We are now heading into the seasonally positive period for equities between November and April. But can we expect the traditional strength this year, especially since stocks have already had such a storming run?
According to James Stack of InvesTech Research, we can. Looking at other years in which the S&P has risen by as much as it has done in the first three quarters of 2013, Mr Stack shows that the market customarily builds on such strength in the final three months of the year. The odds of the S&P registering a gain this quarter are 71 per cent. And even if it does go down, the losses are likely to be mild.
Too many bulls on Wall Street
One fear I do have is that I am far from alone in my optimism right now. Too many US pundits are in high spirits right now, at least for my liking. Just shy of half of all of those polled in this week's Investors Intelligence report were bulls. Fewer than 19 per cent were bears. The gap between them of 31 per cent is worrisome. Readings above 30 per cent often come around tops in the market, at least of the interim variety.
The important thing to note, however, is that readings like today's can persist for some time before things end in tears. The QE-fuelled rallies in the S&P in 2009, 2010 and 2011 were all good examples of this. So, I wouldn't be heading for the hills based on this alone. I am more than happy to keep buying intraday dips as well as the end of more substantial retreats.
S&P 'Triple Top'
I heard an intriguing forecast this week emanate from Walter Studniki, author of the Turning Point newsletter. Mr Studniki sees a bearish 'triple top' formation playing out in the S&P 500 index, with imminent negative implications. "The third top should occur on or about October 30, when Pluto 9.4 + (trine) Mars 9.6/2 = Uranus 9.5," he writes. "…from this top, a very sharp decline to about January 11, 2017 should begin."
The planetary geometry used in working out the timing of next week's high is somewhat beyond my grasp, I am afraid. The timing of the low in 2017 is apparently the product of Gann's "square of nine" and a "logarithmic spiral calculation". As to the first prediction, I feel this bear will end up with a sore backside.