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Broad-based strength

Firmer FTSE

Does the FTSE have catch-up potential? Unlike the S&P and DAX, it still languishes a bit below its all-time highs at 6951, registered back in the year 2000. (Adjusting for inflation, of course, the index is 38 per cent below its millennium levels.) And whereas the S&P is both expensive and longer-term overbought, the FTSE is neither. In my book, this certainly adds up to catch-up potential. I expect to see it above 7000 before long.

Nevertheless, the indices' slowness in making headway in 2014 so far seems to be giving the bears heart. A favourite technique among these top-calling commentators seems to be to compile long lists of reasons why today's conditions are dead similar to 1929, 1974 or 2000. I have to admire their spirit, if nothing else. I find forecasting modest turns in the market tough enough, let alone predicting once-in-a-generation type highs.

FTSE's pert breadth

One thing that does not seem to make it into the scrolls of impending doom, though, is the state of breadth in the US and UK markets. The Advance/Decline line - which captures how many individual companies' stocks are joining in the market's trend - is at record highs in both cases. At major tops, by contrast, the A/D line tends to be weakening. In the final months of a bull market, the gains are typically driven by a small number of giants, therefore.

NYSE breadth confirms highs

Of course, it is not impossible for the market to peak alongside the A/D line. Indeed, albeit in very rare cases, breadth has even peaked after the stock market itself. However, these instances are the exception rather than the rule. I would be readier to heed the pessimists' arguments if the NYSE's A/D line were in decline today.

Whereas stocks have had a muted start to 2014, gold is already up by as much as 5.1 per cent. From what I can tell, many of those who think equities are about to go down the chute are the same as those who think that the yellow metal has now bottomed out. As Tom McClellan points out, though, such action as we've seen so far is hardly conclusive proof of a bullish reversal:

I am not especially impressed by the nature of the gains in gold so far. They have been nowhere near as strong as those last April or last summer, both of which ended in failure. I believe that the current attempt will also come unstuck and probably sooner rather than later. To change my mind, I'd really want to see a monthly thrust through the 10-month average, which currently sits around $1,311.

Melty gold

I see that specialist gold analysts are broadly bearish about the outlook for this year, according to the industry's leading annual survey: While they were wrongly bullish going into 2013, they pretty much nailed it in the previous 10 years. The consensus forecast is around $1,240, but I reckon we may well see $1,100 at some point.