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There are quite a growing number of analysts calling for a top in the main indices. The theme is that this is a bear market rally, and some point, sooner rather than later
The FTSE 100 is trading at 4340 as I type this. The chart is from before a bit before the open, so does not reflect data from 8am. A good swing trading opportunity would arise if the FTSE traded through and closed above 4350 for a couple of hours and then traded back below it again. I will watch for this setup and short accordingly.
Otherwise, if you are long, you should be happy. The channel line towards the 4400 area is in play. I am fully aware that the market is overbought, but my response is to point out how quickly the market went to "oversold" and still managed to drop 1000 points.
The Dow is being talked up and down, depending on what camp you tune into. I tell you though, the Dow can go a lot further than you might think. This little channel break you are witnessing on the chart has the potential of tagging 10,000 in the Dow over the coming months. I have been partially side winked by the whole "its a bear market", but I am encouraged to see the strength above the channel. Sure, you can put a "reason" up for the rally, if you wish: "short covering", "manipulation"... all of those are just excuses why we are not onboard ourselves.
On that note, though, I will watch for the same setup as I do in the FTSE. I am a shorter-term swing and day trader, and a break back below could set about a good fall. So watching is the key word, as I am not long the Dow.
I may have to watch for a while. Take a look at the orange box drawn in the middle of the picture! It is the "sell in May and go Away" theme. It is a fact that in bear markets the period from May to October has a bad track record for the bulls, and in bull markets tend to underperform the period from October to May. It could simply be a rolling top we are witnessing.
ANALYSIS
