By Dominic Picarda.
The indices are bubbling away nicely. I use the word “bubbling” advisedly, as I do believe there are elements of a bubble to the action we are seeing. Far too much is reliant on cheap money, which is causing a disconnect between price-action and the underlying economic and corporate fundamentals.
Still, I am more than happy to play along. As Chuck Prinz of Citigroup famously said ahead of the credit crunch: “when the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” I continue to be bullish on the indices for now.
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FTSE 100
Monday: “The bull-market highs at 6839.1 make the next obvious objective… Stay long or buy a bounce from around the 13-fourhourly EMA.” The FTSE has followed my script perfectly and there’s no sign of it coming to an end yet. The price is somewhat overbought on the fourhourly chart, so I’d await a retreat ahead of 3839
Support: 6789.7– Resistance: 7000.1
Support: 6732.3 – Resistance: 6930.4
Support: 6718.2 – Resistance: 6870.1
Support: 6699.1 – Resistance: 6839.1
DAY: Stay long or buy a bounce from around the 13-fourhourly EMA.
POSITION: Stay long.
Dominic Picarda CFA, CMT writes the Trader column at http://www.investorschronicle.co.uk/comment/the-trader