Unusually, the key US and UK indices have diverged since my last report, with the Dow falling slightly from 10653 to 10447, while the FTSE100 has risen from 5332 to 5428. I'm not reading anything into this - the key is the overall picture not small short-term variations. Last month I said:
"For the first time in a number of months, there's some clarity following what has been a very tricky period analytically. Both charts have now re-established the overall uptrends which began in March 2009, and I think it's reasonable to say that the bull markets which were identified in these reports last year are still intact."
Nothing in the last four weeks has altered that view. If anything, I'm now even more convinced that we are in a bull market which has much further to go, and I'm sticking with my long-term target of FTSE at 10,000 by the end of 2012. Stockmarkets are essentially in multi-month ranging formations which have persisted for a significant amount of time - around nine months. I've been looking more widely than usual at the charts this time, so as well as the Dow and FTSE100 I've taken a look at the S&P500, Nasdaq100, FT30, FTSE All-Share, CAC and DAX. They are all doing the same thing - ranging following last year's bull run.
As I said last time, there were opportunities for the markets to go lower, and they didn't take them. The downward breaks that we saw were quickly reversed without damaging the overall picture, and my feeling now is that those chances have gone, i.e. we are left with two possibilities from here: sideways or up. That suits me fine - I don't mind the markets going sideways as long as they eventually break upwards. In fact the longer they go sideways, the more explosive the upside move is likely to be. Week by week, month by month, the balance is tipping in favour of the bull case, and I'm pleased that I've stayed on that side of the debate through the turbulence of the last few months. Right now, because of last week's strong performance, the indices are a little overbought, so we might see some minor corrective movement, but this will be immaterial to the big picture which is distinctly bullish.
Last time I wrote, £/$ stood at 1.59 and E/$ was at 1.32. I said…
