Better Trader

Outlook for 2021

We are reaching the limit of QE, if you think the bull market will never end because of QE / stimulus, you are mistaken. All is explained in my video.

I have created a video in which I explain my view on the stock market, gold, bond yields, dollar and inflation. At the end of the video I give you a link to register to join my training group.

Make sure you watch the full video and please join the group and you will receive my training videos.

To watch the video click here

The US economy grew by 2.1%

The US economy grew by an annualized 2.1% in Q4, the same as in the previous period and market forecasts of 2.1%, advance estimates showed. The increase in real GDP in the fourth quarter reflected positive contributions from personal consumption expenditures (PCE), federal government spending, state and local government spending, residential fixed investment, and exports, that were partly offset by negative contributions from private inventory investment and nonresidential fixed investment.

 

source: tradingeconomics.com

Overbought 34-day BTI

 

When the indicator is above 400 (overbought) the FTSE 100 is near the top. Previous sell signals in January and May 2018 were accurate, the stock market declined. The indicator is now above 400.

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Factors to watch

Latest economic data from the US was soft, this could delay any hike in US interest rates - bullish for stocks

Top 20 Differential is oversold, this indicator measure strength / weakness in the blue chips. When the blue chips are weak they tend to bounce back so it's bullish for stocks.

Bond yields are rising it could be because UK inflation is on the rise. If today's consumer price index is strong, the pound will strengthen and UK stocks could fall. A weak CPI would be bullish for stocks.

Netflix shares soar on bullish outlook.

Factors to watch

The strength of the S&P 500: declines are followed by large retracements

Sentiment is bearish, will the FTSE 100 remain below 6857? Risk of a slide.

Mining stocks: better than expected Chinese manufacturing could push mining stocks higher and this would support the FTSE 100

 

Better Trader, Better Forecast

As I said at the start of 2015, inflation and growth will drop sharply in coming months, the stock market will plunge. Greece was never the real issue, China was. I predicted the bursting of the Chinese stock market bubble and its consequences on Western economies and stock markets.

It's not the first time I have been spot on on the direction of the stock market and the events that will lead to a bear market. Back in April I made a bearish call LIVE at the UK Investor Show, warning investors of a massive correction during the summer. You can watch the video here:

Thierry Laduguie

 

 

When Investors Don't Trust Central Banks

The 13-day BTI is no longer oversold which means the FTSE is not oversold and there is now potential for a large fall. The Chinese stock market is closed today and the FTSE is down in pre-open, this time the influence is coming from Japan where stocks are down 3%. The real influence is more likely to be the global slowdown, when sentiment is bearish, bad news is bad news. So yesterday when Mario Draghi announced that inflation had been downgraded and growth cut, that was the bad news and investors should have sold stocks. Instead they bought. Why? Because Draghi also announced some good news, an increase in quantitative easing to boost growth. Investors focused on the good news and not the bad and that was a mistake. In a period of bearish sentiment you should focus on the bad news, the unexpected rally after 1.30pm was an opportunity to sell.

As I said before, inflation and growth will drop sharply in coming months, the stock market will plunge. I also said that investors will lose confidence in the central banks’ ability to stabilise the markets and the economy. We are seeing this new phenomenon right now. The announcement that the ECB will increase QE has failed to boost the stock market, the FTSE is down this morning. In the next few month or next year expect more of the same behaviour. Central banks and governments will intervene to stop the slide but this time bearish sentiment will be too strong. Bearish sentiment will grow with the slide.

To receive regular analysis and trading signals on the FTSE 100 subscribe to Better Trader

S&P 500 at key resistance

The rebound that follows a third of a third which is the most powerful wave down so far, tend to find resistance around the 38.2% retracement. This level is 1957 which is where the index is in pre-open. For this reason there is an increased probability that the rally will run out of steam.

Why we are long on FTSE 100

Talking about market timing, when you read my indicators you get a good indication of the short term direction of the FTSE 100. Here is an example of a bullish signal:

We went long FTSE 100 on 13th March, this is what I said to my members:

The decline is a fourth wave….The 200-day moving average is at 6689, this level is strong support this is why I expect wave 4 to end near that level….The BTI is up which can be interpreted as bullish…6694 marks the bottom of wave 4 of an ending diagonal [1,2,3,4,5]…The Top 20 Differential is oversold (bullish)…The next target is a 7000 for wave 5.

That was the chart I published:

 

I have re-designed the FTSE 100 short term forecast report, all the indicators are now in a table, see:

 

This gives you a good idea of the short term direction of the FTSE 100. When most indicators are bullish the FTSE 100 has an increased probability of going up. These indicators are very reliable, they have been used for many years and they make money!

But today volatility will be high at 6pm when the FOMC meeting minutes are released, this is an important announcement, so many investors focus on the direction of interest rates. If the statement hints at an early rise in interest rates, the stock market will sell off.

To subscribe to the FTSE short term forecast click here

Until next time

Thierry Laduguie