Non-confirmation Between FTSE 100 and S&P 500, Upside is Limited

Share On Facebook
share on Linkedin

Yesterday was a very quiet day with the FTSE 100 trading in a 30 pts range, the S&P was not moving either. I read that the standard deviation of the S&P 500 from January to April is at its lowest in 20 years. Standard deviation is a measure of volatility, when the index moves sideways volatility is low, that is what we are getting at the moment.

This happens because valuations are too high but investors are not selling because they are hoping for further gains. They are not selling because Trump is now in charge and they know that one of its objectives is to boost the stock market. So the stock market has limited upside and limited downside, which means selling call options with a high strike price is a good strategy. Based on the pattern the stock market will probably be higher in the next month or two but upside is limited. In the near term there is a chance stock markets will pullback, but the pattern on the S&P is not clear, it’s not clear if the S&P will rally or decline in the next few days.

On the data front UK and European manufacturing PMIs continue to improve, as a result GBP/USD surged yesterday. This was meant to weigh on the FTSE but the FTSE was strong and closed higher, the UK index had some catching up to do after the Bank holiday weekend. European and US stocks are moving to record highs while the FTSE is well below its all-time high, an indication the FTSE is underperforming global stock markets. Tonight we have the FOMC statement, I don’t expect any surprise move on interest rates given the recent soft patch of economic data. Watch out for some sharp moves in GBP/USD.


As the S&P is still below 2401 we still don’t know if the next move is up or down. The sideways action of the last few days is an indication the S&P wants to move higher, this is in contrast with the next move is the FTSE. The FTSE appears to be tracing out a downward zigzag [(a),(b),(c)] for wave ii (circle). The decline to 7197 last week was wave (a), the current bounce is wave (b), this bounce may have ended at 7254 as the move is in three waves. If so the next move is down which is wave (c) and it should end below 7197. But this is not high probability based on the impulse wave up in the S&P. If the S&P rallies above 2401, the FTSE won’t decline.

The bad news is, even if the S&P rallies, any move higher will meet stiff resistance in my view. Stock markets have priced in too much good news and with valuations running high, the question is, has the FTSE enough momentum to rally past its all-time high at 7447? A break above that level is possible if we are in wave 5, but I don’t expect a massive rally when the FTSE will be near its all-time high. This means selling call options expiring in July should be a good bet.

Thierry Laduguie is Trading Strategist at

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

This area of the site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Plc. ADVFN Plc does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.

Leave A Reply

Do you want to write for our Newspaper? Get in touch:

By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions

P: V: D:20220816 00:59:43