FTSE 100: Bull or Bear Market?

Share On Facebook
share on Linkedin
Print

Sometimes I get emails from people asking me if I am sure we are in a bear market. No one can be sure because a forecast is based on probabilities. If the probability of a bear market is 80%, there is 20% chance the FTSE 100 is in a bull market. If the FTSE rises it’s doing the low probability scenario.

© Image copyright tjeerd

The important thing is to go with the high probability scenario. If you trade in the direction of the high probability scenario you will have more winners than losers over time. The question now is, are we in the second wave of a bear market or the first wave of a bull market?

If I assume that the rally is the second wave of a bear market, the current rally which is near the all time high is normal. Very often the second wave up in the early stages of a bear market will retrace a large portion of the first wave. This happened in 2007:

 

In 2007 wave 2 retraced 100% of wave 1 (without making a new high) then the FTSE collapsed. Today the FTSE has retraced nearly 100% of its wave 1. The next move will be a sharp decline for wave 3.

Now, if we assume that we are in a bull market, the rally is wave 1:

In this alternate scenario, the low in March was the bottom of a fourth wave, the current rally is either the fifth wave or wave 1 inside the fifth wave. If it is wave 1, it is ending and the next move is wave 2 down to the 7200-7300 area.

Why is the rally ending? Because my trend reversal indicator (34-day BTI) is overbought above 400, see:

 

The 34-day BTI is the red bar chart, when this indicators moves above 400, the FTSE will turn down to start a multi-week or multi-month decline. Right now the 34-day BTI is at 542.

It does not matter if we are in a bull or bear market, either way the FTSE 100 will decline.

Thierry Laduguie is Trading Strategist at www.e-yield.com

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 ADVFN.com 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 ADVFN.com 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: newspaper@advfn.com

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

P: V: D:20220630 20:45:03