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Is the Stock Market Mood More Bullish Than I Thought?

Posted on the 03 November 2013 by Andyepb

Chart of FTSE-100 at 1st November 2013I said last week that the FTSE was looking toppy and I still expected it to stay in its recent range of 6800-6000, but I have changed my mind about that. It has had a bit of a pause this week, only rising 13 points, but I have read a couple of articles in the financial press that suggest the market’s mood is a lot more bullish than I thought. One even compared the atmosphere to the euphoria before the 1987 crash! As an amateur, it is difficult for me to gauge the market, but the Dow does seem to be losing its fear of the dreaded taper, slipping less than one percent this week in response to the “disappointing” Fed statement after the FOMC meeting on Wednesday. It seems increasingly likely that the demise of QE will be repeatedly pushed back for some time to come and, in the UK, the return of economic growth is cheering the professionals, so maybe it is time for the FTSE to break out of its recent range.

The recent 400 point rise, with only one down day, is extremely strong and suggests that the mood is very positive, so I am now predicting that there will be no return to 6000 and the FTSE will continue to rise. What I said last week about the CAPE still stands though, and I don’t expect a 50% rise like we saw in 1987, but perhaps 30% is possible (as measured from the recent low), i.e. the FTSE could reach 8000 and quite quickly.

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