05 Mar FTSE and SPX Monthly Charts; 5th March 2013
A quick mention before I talk about this FTSE chart in case you missed it in the comments section, the USD:CHF swing long is now 90% closed. I’ve not marked it on the trades log yet simply because I opted to run the last 10% of the trade just to see where it takes me.
With DOW making all time new highs today, I thought I’d take a look at FTSE.
There tends to be a belief across many U.S based blogs that INDU/DOW leads the U.S stock markets and the reasoning behind this is often followed up with historical facts proving the case. I don’t doubt that notion.
However, I have a belief that FTSE (often mirrored by SPX) is a leading indicator for U.S Indices. I can’t really prove it here in this post but I’ve pointed out many peculiarities between FTSE and U.S Indices on my ADVFN forum over the Years and in those instances evidence was obtained to suggest that under some circumstances FTSE can be used as a guide to the future performance of U.S Markets.
For now FTSE is not making new highs, its apparently lagging the DOW, but in fact I find when FTSE does not participate when DOW achieves new highs/lows etc, its often a sign that DOW has overshot its fair value. In the short term this doesn’t give us anything useful to go and make a trade with, but it gives good reason to remain cautious at all times when one of the U.S Indices appears to go off and do its own thing.
DOW is now in uncharted territory so we are certainly in interesting times, particularly when you consider its new highs don’t appear to have any relationship with main street!
For FTSE, I think this Monthly chart is a very interesting one, and I can imagine there will be a lot of people looking to exit long positions at the top edge of this huge multi-Year triangle.
If this triangle gets achieved, I for one will certainly be entering a swing short, even if only to catch a reaction move of 50 points or so:
For SPX we have an expanding megaphone type pattern, which would fit the U.S theory of DOW leading and SPX following:
After seeing these charts you can certainly accuse me of using T.A in its most basic and improbable form, but I’ve made quite a number of nice trades from such set-ups over the Years and unless there’s something on the chart shouting out at me not to take a counter-trend trade when the time comes, I’ll almost certainly be banking a few points on the counter-trend moves from these major levels. What you must remember is that when price makes all time new highs, large T.A based trading houses have very little historically proven T.A to go by, so they draw exactly the same lines on their charts as we do on ours and the more of us that trade from the same basic levels, the more chance of a reaction at those levels.