It Looks Like the Dip is Back On!

The FTSE has oscillated around the 20 day moving average (20dma) over the last ten days or so which is usually a sign that the rally has run out of steam. It is actually forming another instance of my peak pattern; we just need a bounce back over the 20dma (probably to about 6800) for the top to be in. I am not surprised that my most recent view has gone out of the window as it was largely inspired by the conspirators messages and so should have been viewed with more scepticism. So it’s back to my original plan for a dip of around 1000 points over the next couple of months or so. After that however, I think we could be on for 8500 within 18 months or thereabouts.

The FTSE has recently been losing ground against the Dow (which has continued to make new all-time highs) and one reason for that has been last week’s positive economic news. The better than expected UK GDP and unemployment figures have brought forward expectations of interest rate rises by about two years. Higher interest rates obviously increase debt costs for businesses and reduce profitability, so lowering share prices. Carl Icahn, the prominent Wall Street investor, recently commented on the fact that ultra-low interest rates are flattering the Price/Earnings ratio (a measure of share price value relative to company profits) of US stocks so that he thinks the market is much more overvalued than it currently looks on this measure. He certainly spooked the market, but I am not going to predict what the excuse will be for the dip I am forecasting, though I will observe that the US budget difficulties still have yet to be resolved.