The readers who have emailed in this week don't seem that hopeful that the rally will resume any time soon. "I think we are in a consolidation and have been for six months, and are now heading down again. I am short the FTSE for the next 14 trading days or so," wrote Christopher Claxton on 19 May. "The index highs on Wall Street have a reluctant feel to them and defensive sectors are suddenly outperforming. I'm going off on holiday. Could be a good idea?" asks Peter Bennett.
A holiday is certainly a tempting proposition right now. When the markets lack genuine direction, I find trading exasperating. Buying at the bottom of a range and shorting at the top of it has never really been a strength of mine. Going long on pullbacks in an uptrend and shorting bounces in a downtrend have always felt much more intuitive to me. Anyhow, sod's law would inevitably mean that a trend would declare itself the minute I landed at my destination. So, I'm staying put.
Transports fly high
Do I still think that the stagnation of recent weeks will be resolved in bullish fashion? Despite the latest setback, I don't have much reason to change tack. By any sensible definition, the uptrend remains well in force on the S&P 500, DAX 30 and FTSE 100. The Dow Transports made a new record high only on Monday 19 May. The sideways action has been gentle and contained. Tops, by contrast, tend to involve much more volatility.
Still, I have seen at least one development that I see as less than helpful to my cause. The FTSE 250 index has broken decisively lower to fresh lows for the current correction, and on higher volume. In the process, it reversed the swing-chart buy-signal that it had given only at the start of last week. It has lately breached its 10-month exponential moving average and could well close below there at the end of May, which I would see as more negative still. Although I recently sold up my FTSE 250 tracker, I am still slightly unsettled by the mid-caps' weakness.
Nasdaq's choppy ascent
I would be more concerned still were the same happening in the Nasdaq 100. I see the tech-laden index in much the same way that I do the FTSE 250, as a barometer of risk appetite. Having bounced off its 10-month EMA in mid-April, it has kept climbing. Admittedly, it is not the most determined of rallies, being somewhat erratic and shallow. The swing-chart buy-signal given last week remains in force. That said, I am not really tempted to go long here. I need to see the move accelerate before jumping aboard. In the meantime, I will stick with trying to play the DAX and FTSE in small size only.