Market Report 2nd August

THIS IS A BULL MARKET.
 
Is that my opinion? No, it's based on the evidence that I see on the charts.
 
Everyone has an opinion, and they are, of course, entitled to it. But opinions in the market are often no more than a guess or a hunch. That's no good if you want to achieve a high accuracy. You must have something more, and that something has to be objective evidence.
 
So what's the evidence? Quite a lot actually:
 
a) Coppock signals on all the UK & US indices.
b) Nine-month head & shoulder bottoms completed on the FTSE100 & Dow.
c)  A sequence of 11 days consecutive days up on the FTSE100 and 12 on the Nasdaq.
d) Three Tridents in six weeks on the Dow, a pattern that rarely appears in bear markets.
 
Just the Coppock on it's own is enough for me. I reported the Coppock signal on the UK All-Share Index on 15 May and immediately turned bullish on the market. With all the other evidence as well, the bull case is very strong. Interestingly, the combination of Coppock and nine-month head & shoulders is exactly the same as in 2003 on the Dow. Please read my Inside Guide to Indicators on this site for an appraisal of just how good the Coppock Indicator is.
 
Currently the Dow is at 9171, up from 8280 when I wrote my last column. FTSE stands at 4608, up from 4236. The head & shoulders pattern on the FTSE gives an initial target of 5725. Here's what I wrote four weeks ago when the markets had just fallen sharply: "I do not see these moves as being a resumption of the bear market, merely corrections in the early stage of the new bull market"
 
Clearly it is not a widely accepted view at the moment that we are in a bull market. That doesn't bother me - it's typical of the early stage. When the public and the fund managers concede that it is a bull market and realise they are missing out, that's when we will enter the middle phase and you'll see things really take off. But it won't happen for a while yet. That kind of acceptance usually comes 6-9 months after the low point.
 
The bear market lasted just under two years. A bull market usually lasts longer than the preceding bear market - that's just common sense - markets fall faster than they rise, so the recovery takes longer. During the last ten years, we have been in bear markets for five which is an unusually high proportion - the long-term average would be more like 25%. So, bearing those two observations in mind, I expect a 3 to 4 year bull market. And I'll go one stage further; I think the FTSE100 will be at 10,000 by the end of 2012.
 
Now that I've got your attention, if you would like to take the first step to understanding Point & Figure charts - my primary technique - then I will be pleased to send you an introduction to the method, free of charge. Just call my office on 0161 428 1069 and ask for a copy, mentioning Stockopedia. Now really is the time to gear up your analytical technique for the new bull market. While your at it, why not take the UK's best, most comprehensive and longest-established training course series. I'm sure it will pay big dividends over the next few years.