Archive for February, 2016

Further falls ahead?

Mon, 22nd Feb 2016 Leave a comment

Chart of FTSE-100 at close on 19th February 2016.The FTSE did bounce off the support level I called before Christmas, rising over 400 points in a modest rally. However it has more than erased those gains since, with sentiment over slowing Chinese growth, falling oil and rising concern over US interest rates becoming ever more negative. With sentiment so negative it was perhaps not surprising, as a contrarian, that we’ve seen another bounce over the last week or so. The FTSE is sitting well above its 20 day moving average at the moment, so the decline seems to have been arrested for now and it looks like we could hit the 200dma in the near future. After that though, I suspect we will see further slides as I cannot see sentiment improving significantly before the June 23rd EU referendum. There are likely to be plenty of scare stories from both sides to ramp up the uncertainty prior to that and there is nothing the markets like less than uncertainty. In addition, investment trust discounts were holding up very well before the FTSE broke below support just under 5,900, but have increased significantly since, suggesting that there could be further market weakness to come.

Chart of Dow Jones IA at close on 19th February 2016.The Dow has bounced off its August low, so hasn’t broken support yet, but the concern over China, oil and the Fed’s intention to continue interest rate rises is likely to mean that it will in my view, though probably not until after it has hit its 200dma. I don’t have any target in mind for a low yet, so will just have to play it by ear.

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