Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
US Housing Market House Prices Momentum Analysis - 26th Feb 21
FOMC Minutes Disappoint Gold Bulls - 26th Feb 21
Kiss of Life for Gold - 26th Feb 21
Congress May Increase The Moral Hazard Building In The Stock Market - 26th Feb 21
The “Oil Of The Future” Is Set To Soar In 2021 - 26th Feb 21
The Everything Stock Market Rally Continues - 25th Feb 21
Vaccine inequality: A new beginning or another missed opportunity? - 25th Feb 21
What's Next Move For Silver, Gold? Follow US Treasuries and Commodities To Find Out - 25th Feb 21
Warren Buffett Buys a Copper Stock! - 25th Feb 21
Work From Home Inflationary US House Prices BOOM! - 25th Feb 21
Man Takes First Steps Towards Colonising Mars - Nasa Perseverance Rover in Jezero Crater - 25th Feb 21
Musk, Bezos And Cook Are Rushing To Lock In New Lithium Supply - 25th Feb 21
US Debt and Yield Curve (Spread between 2 year and 10 year US bonds) - 24th Feb 21
Should You Buy a Landrover Discovery Sport in 2021? - 24th Feb 21
US Housing Market 2021 and the Inflation Mega-trend - QE4EVER! - 24th Feb 21
M&A Most Commonly Used Software - 24th Feb 21
Is More Stock Market Correction Needed? - 24th Feb 21
VUZE XR Camera 180 3D VR Example Footage Video Image quality - 24th Feb 21
How to Protect Your Positions From A Stock Market Sell-Off Using Options - 24th Feb 21
Why Isn’t Retail Demand for Silver Pushing Up Prices? - 24th Feb 21
2 Stocks That Could Win Big In The Trillion Dollar Battery War - 24th Feb 21
US Economic Trends - GDP, Inflation and Unemployment Impact on House Prices 2021 - 23rd Feb 21
Why the Sky Is Not Falling in Precious Metals - 23rd Feb 21
7 Things Every Businessman Should Know - 23rd Feb 21
For Stocks, has the “Rational Bubble” Popped? - 23rd Feb 21
Will Biden Overheat the Economy and Gold? - 23rd Feb 21
Precious Metals Under Seige? - 23rd Feb 21
US House Prices Trend Forecast Review - 23rd Feb 21
Lithium Prices Soar As Tesla, Apple And Google Fight For Supply - 23rd Feb 21
Stock Markets Discounting Post Covid Economic Boom - 22nd Feb 21
Economics Is Why Vaccination Is So Hard - 22nd Feb 21
Pivotal Session In Stocks Bull Bear Battle - 22nd Feb 21
Gold’s Downtrend: Is This Just the Beginning? - 22nd Feb 21
The Most Exciting Commodities Play Of 2021? - 22nd Feb 21
How to Test NEW and Used GPU, and Benchmark to Make sure it is Working Properly - 22nd Feb 21
US House Prices Vaccinations Indicator - 21st Feb 21
S&P 500 Correction – No Need to Hold Onto Your Hat - 21st Feb 21
Gold Setting Up Major Bottom So Could We See A Breakout Rally Begin Soon? - 21st Feb 21
Owning Real Assets Amid Surreal Financial Markets - 21st Feb 21
Great Investment Ideas For 2021 - 21st Feb 21
US House Prices Momentum Analysis - 20th Feb 21
The Most Important Chart in Housing Right Now - 20th Feb 21
Gold Is the Ultimate Reserve Asset - 20th Feb 21
Is That the S&P 500 And Gold Correction Finally? - 20th Feb 21
Technical Analysis of EUR/USD - 20th Feb 21
The Stock Market Big Picture - 19th Feb 21
Could Silver "Do a Palladium"? - 19th Feb 21
Three More Reasons We Love To Trade Options! - 19th Feb 21
Here’s What’s Eating Away at Gold - 19th Feb 21
Stock Market March Melt-Up Madness - 19th Feb 21
Land Rover Discovery Sport Extreme Ice and Snow vs Windscreen Wipers Test - 19th Feb 21
Real Reason Why Black and Asian BAME are NOT Getting Vaccinated - NHS Covid-19 Vaccinations - 19th Feb 21
New BNPL Regulations Leave Zilch Leading the Way - 19th Feb 21
Work From Home Inflationary House Prices BOOM! - 18th Feb 21
Why This "Excellent" Stock Market Indicator Should Be on Your Radar Screen Now - 18th Feb 21
The Commodity Cycle - 18th Feb 21
Silver Backwardation and Other Evidence of a Silver Supply Squeeze - 18th Feb 21
Why I’m Avoiding These “Bottle Rocket” Stocks Like GameStop - 18th Feb 21
S&P 500 Correction Delayed Again While Silver Runs - 18th Feb 21
Silver Prices Are About to Explode as Stars are Lining up Like Never Before! - 18th Feb 21
Cannabis, Alternative Agra, Mushrooms, and Cryptos – Everything ALT is HOT - 18th Feb 21
Crypto Mining Craze, How We Mined 6 Bitcoins with a PS4 Gaming Console - 18th Feb 21
Stock Market Trend Forecasts Analysis Review - 17th Feb 21
Vaccine Nationalism Is a Multilateral, Neocolonial Failure - 17th Feb 21
First year of a Stocks bull market, or End of a Bubble? - 17th Feb 21
5 Reasons Why People Prefer to Trade Options Over Stocks - 17th Feb 21
The Gold & Gold Stock Corrections Are Normal - 17th Feb 21
WARNING Oculus Quest 2 Update v25 BROKE My VR Headset! - 17th Feb 21
UK Covid-19 Parks PACKED During Lockdown Despite "Stay at Home" Message - Endcliffe Park Sheffield - 17th Feb 21
How to Invest in ETFs in the UK - 17th Feb 21
Real Reason Why Black and Asian Ethnic minorities are NOT Getting Vaccinated - NHS Covid-19 Vaccinations - 16th Feb 21
THE INFLATION MEGA-TREND QE4EVER! - 16th Feb 21
Gold / Silver: What This "Large Non-Confirmation" May Mean - 16th Feb 21
Major Optimism for Platinum, Silver, and Copper - 16th Feb 21
S&P 500 Correction Looming, Just as in Gold – Or Not? - 16th Feb 21
Stock Market Last pull-back before intermediate top? - 16th Feb 21
GAMESTOP MANIA BUBBLE BURSTS! Investing Newbs Pump and Dump Roller coaster Ride - 16th Feb 21
Thinking About Starting to Trade This Year? Here Are Some Things to Keep in Mind - 16th Feb 21
US House Prices Real Estate Trend Forecast Review - 15th Feb 21
Will Tesla Charge Gold With Energy? - 15th Feb 21
Feeling the Growing Heat and Tensions in Stocks? - 15th Feb 21
Morgan Stanley Warns Gasoline Industry Is About to Become Totally Worthless - 15th Feb 21
Debts Lift Gold - Precious Metal Prices Will Rise on a Deluge of Red Ink - 15th Feb 21
Platinum Begins Big Breakout Rally - 15th Feb 21
How to Change Car Battery Without Losing Power, Memory, Radio Code Settings - 15th Feb 21
Five reasons why a financial advisor can make a big difference to your small business - 15th Feb 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

The Stock Market - FTSE Bull or Bear?

Stock-Markets / UK Stock Market Feb 02, 2008 - 03:38 AM GMT

By: Fat_Prophets

Stock-Markets

Best Financial Markets Analysis ArticleSo far, 2008 has been an extraordinary year for investors. Sharp falls in December and January, which culminated in last Tuesday morning's panic selling, saw the FTSE100 down more than 20 percent from October highs. This supposed magic 20 percent figure sparked widespread talk of an 'official bear market'. But for the remainder of the week, the market rallied, thus pulling us out of bear market territory. Does this mean we're back in a bull market?

"On the one hand we have a contracting global credit bubble and on the other we have the US authorities manning the liquidity pumps to stimulate a flagging economy. "


We raise this rather useless point to illustrate the difficulty of broadly defining market trends. The conventional wisdom is that a 10 percent fall represents a correction while a 20 percent fall represents a bear market. We don't support these simplistic methods.

As Members know, we use technical analysis to assist with our fundamental research. There is nothing in the field of technical analysis that states that a fall of 10 percent signals a correction, or that a fall of 20 percent signals a bear market.

In our opinion, the jury is still out on the bull/bear market story. From a short term perspective, last week's sell-off was not good. As shown on the daily chart below, the FTSE100 went perilously close to August lows.

But if we look at a weekly chart, which provides a longer term perspective on market direction, the picture is mixed. The chart below shows the weekly close on the FTSE100.

The recent break and close below the August low of 6038 satisfies the Dow Theory criteria for a bear trend. However, falls in the region of 1200 points during January have seen technical indicators become considerably oversold. In our opinion, this indicates further downside risks are limited in the near-term.

The story is similar for the FTSE350.

While we cannot rule out further volatility in the months ahead, it is encouraging to note that the index currently remains above the low close of June 2006 at 5507. So we cannot say with great certainty that the bear is waking from his long period of hibernation.

This tug-of-war between the bull and bear viewpoint as discussed above is hardly surprising. On the one hand we have a contracting global credit bubble and on the other we have the US authorities manning the liquidity pumps to stimulate a flagging economy.

Last week, the US Federal Reserve provided Wall Street with an unprecedented emergency rate cut of 75 basis points to offset an impending stock market meltdown. And yesterday they took a further 50 basis points off, taking rates to 3 percent.

On top of this, George Bush is prompting Congress to pass a US$150 billion fiscal stimulus package. The package is designed - unbelievably - to get consumers to spend more.

If the consequences of such action weren't so serious, it would be funny. Lower interest rates and abundant credit are the cause of the current market problems, so how lower interest rates and more credit will change things is anyone's guess.

Yet the Fed really has no choice but to lower interest rates and try and contain the fallout from the deflating credit bubble. Wall Street and Washington are too powerful for the Fed and would not stand for a responsible, long term monetary policy.

These recent events simply reinforce our bigger picture views. The big winners out of all this will be the precious metals, and probably to a lesser extent oil and the base metals, given their more economically sensitive fundamentals. So a portfolio overweight in 'real' assets should continue to outperform other sectors.

The other major winners will be Asian nations and oil producers, who will undoubtedly continue to use their large foreign exchange reserves to buy up US assets. These countries collectively have huge holdings of US debt. Debt is a claim on assets, and there will be increasing claims on US assets as the credit crises continues to unfold, as debt is swapped for equity.

With US cutting interest rates as fast as possible, the Bank of England is also facing similar pressures to loosen. However the Bank is in a difficult bind.

The UK housing market is creaking and there are clear signs that a weak consumer and struggling financial sector may have a large impact on economic growth.

Then there is inflation. Already above the Bank of England's 2 percent target and expectations are even higher. A YouGov survey released this week pinned these at 3.3 percent over the next 12 months, with higher food and energy prices the key drivers. The Bank's concern would be that if not dampened these expectations could herald a wage price spiral.

Perversely, despite predictions by many of a cut next week, the textbook decision would be to increase rates to combat rising inflationary pressures. This would also provide the Bank with inflation fighting credibility. Remaining on hold, and adopting a 'wait and see' on the other hand, is for the moment probably the easiest (in the short term) decision. However the Bank will have to put their cards on the table sooner or later.

In summary, given the high level of uncertainty investors are experiencing (witness the huge recent daily market moves) our strategy is to remain cautious in terms of investing additional capital in the market.

We advocate buying on panic days like last Tuesday (hence our mid-week buy alert) and continuing to accumulate gold and gold stocks. Gold is clearly in a bull market and although we expect continuing volatility, the outlook remains extremely solid. So we will continue to recommend opportunities as they arise.

And while on the subject of gold, the charts are painting an extremely bullish picture. After breaking out of a triangle formation in late December, the gold price marched through the old nominal high of US$850/oz with ease. The following pullback was notable as it ended abruptly at the US$850 level, before again resuming higher.

While US officials continue to think they can print their way to wealth, we'll continue to stick with our bullish views on gold. Furthermore, we'll continue to recommend gold and gold stocks on any short term corrections.

In terms of other sectors, as we have mentioned, value is returning to the market but we see no need to rush in. If this does turn out to be a bear market, cheap stocks can get cheaper. Similarly, cheap stocks can become expensive if earnings miss expectations. Given that many stocks are still in a downtrend, we feel we have plenty of time to investigate opportunities.

For a FREE sample of Fat Prophets research please call 02079369357 or email peter.lomas@fatprophets.co.uk.

About Us - Fat Prophets provides independent advice on the financial markets where our objective is to be transparent, accountable, objective and ethical. We believe that integrity is the central characteristic of every successful investor. Our independence in financial markets is derived from the fact that Fat Prophets does not execute transactions or provide investment banking services.

Fat Prophets principal focus is to deliver a quality service to Members by discovering and identifying quality stock recommendations on the London Stock Exchange. The launch of our UK service follows the successful establishment of Fat Prophets in Australasia.

Founded in June 2000, Fat Prophets is owned and operated by financial markets professionals. Having become Australia's leading independent stock market advisors, our horizons were broadened during 2003 through the addition of Fat Prophets United Kingdom. Our service offering also includes Fat Prophets Mining & Resources, Fat Prophets USA, and Fat Prophets Funds Management.

Fat Prophets UK was launched in 2003. As one of the world's largest stock markets, the UK offers an expansive array of investment opportunities. Within this environment our value-based strategy has proven highly successful, and fattened our Members' portfolios.

Fat Prophets Australasia focuses on delivering a quality service to Members by identifying and recommending undervalued companies on the Australian and New Zealand stock exchanges.

Fat Prophets Mining & Resources coverage extends to companies involved in mining, exploration, precious metals, diversified resources, energy, mineral sands, bulk ores, diamonds, as well as mining and energy infrastructure services.

Fat Prophets USA has an international focus, recommending a broad range of US based and foreign companies trading on the US exchanges.

Fat Prophets Funds Management In 2005 the company diversified into funds management when the Fat Prophets Australia Share Fund (Fat Fund) was successfully listed on the Australian Stock Exchange after $33 million was raised.

Disclaimer : Mint Financial (UK) Ltd, trading as Fat Prophets United Kingdom, has made every effort to ensure the reliability of the views and recommendations expressed in this report. Fat Prophets United Kingdom research is based upon information known to us or which was obtained from sources which we believed to be reliable and accurate at time of publication. However, like the markets, we are not perfect.
This report is prepared for general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Individuals should therefore discuss, with their financial planner or advisor, the merits of each recommendation for their own specific circumstances and realise that not all investments will be appropriate for all subscribers.
To the extent permitted by law, Fat Prophets United Kingdom and its employees, agents and authorised representatives exclude all liability for any loss or damage (including indirect, special or consequential loss or damage) arising from the use of, or reliance on, any information within the report whether or not caused by any negligent act or omission. If the law prohibits the exclusion of such liability, Fat Prophets United Kingdom hereby limits its liability, to the extent permitted by law, to the resupply of the said information or the cost of the said resupply.

Fat Prophets Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules