From last months magazine we opined upon the potential retracement levels in the FTSE & S&P 500… Both duly hit today.
“S&P 500 – With the MACD lines now also rolling over and the index recently piercing the 20 day moving average to the downside, and not having touched the 50 day since December of last year, a case for further consolidation with a probable downwards bias can certainly be made. A move down towards the 1350 level would represent around a one third retracement of the move from December 2011 – markets have a habit of retracing previous moves by typically one third or one half, and this can be expected with a reasonable degree of conviction in the next few weeks.
With the FTSE 100, as you can see from the chart below, strong support is centred around the 5550/5600 level and any penetration of this price-band on heavy volume that ends with a strong rise on the day back over 5600 is likely to signal that the re-tracement/consolidation we are currently seeing is likely coming to an end.
If you are minded to the bull side, then I would suggest averaging into positions over a period of a couple of weeks on any weak days that take us back towards the 5500/5600 level. The RSI that is moving back towards the 50 level is also adding weight to the case that a nice set-up for a long swing trade is in the making. Conversely, for those of a bearish tendency, a decisive break back below the key 5500 level will likely presage a difficult summer, and a re-test of last year’s 4800 level cannot be ruled out. The weekly chart shows a potentially worrying roll over in the MACD and again illustrates just how critical the 5600 level is – particularly on a weekly closing basis.
To conclude, we believe that the battle between bulls and bears is likely to continue on in the near term with no meaningful victor. In the UK, the 5550/5600 level on the FTSE 100 is likely to be a good point to look to get long, and we expect Japan is likely to continue to show strength this year relative to most other markets, indeed, we strongly suspect that this market is in the very early stages of a multi-year bull run.”
Click here to read the full artice (page 6) – http://issuu.com/spreadbetmagazine/docs/spreadbet-magazine-v4_generic
I am almost spoilt for choice with regards to value at present – Aviva 308p, Lonmin 950p, Kazakhmys 750p, Rimm $11.80, Bowleven 78p, Xcite Energy 98p, Man Grp 83p, Icap 350p, Heritage Oil 134p, Gulfsands Petroleum 117p, Cable & Wireless 32p, the list goes on…. the value to me looks compelling and I’m guessing we’re nearer the end of this rout than the beginning…
UPDATE – Put Call ratio in the US hovering around 1 again – 3rd time in a week – extremely rare…
UPDATE 2 – Looks suspiciously like a margin wash out to me with the moves in a number of stocks. Strong hands are presented with a gift today.