A reminder that we periodically take a look at the US 500 chart (or S&P) to get a feel for what our chosen FTSE 350 companies may do.
We use the US 500 and the FTSE 250 charts as the FTSE 100 is, we feel, more driven by the large commodity companies and therefore does not provide us with a platform to judge the non commodity companies within the index.
Even if this were not so, we’d still consider the US 500 as a good indicator of not only the associated 500 companies but also of companies within the FTSE 350.
The US 500 is at a big number position which often has an effect on the chart. Moreover, we have a measured move up to its present position from the 2014-2015 high and low. It would seem also that we are in for a consecutive ‘bear’ month. (The bulls go up and the bears go down).
The strength of the bulls however would, to my mind, not bring the chart too far down at this stage. I would consider any pull back to be a flag rather than a major reversal. Possibly the next 2 to 3 months may see a pull back. This, I think, will probably be bought by the bulls and the market pushed back up to the high of the big number again.
On the daily chart this will create a more significant double top. And this in itself may be strong enough to create a major trend reversal which will start on the daily chart and follow through to be measured on the weekly and possibly the monthly chart as a reversal.
Where would the reversal go? Back down to the 1800 position and at the low of 2014 to 2015.
Lets now take a look at the FTSE 250 monthly chart.
The chart has been in a tight bull channel for some time. Of note, I would have bought the December close anticipating a swing target that is at, or almost at, the present high. This high is still short of the top of the channel but it is at a measured move position and almost at a big number. I personally wouldn’t short at this point but I wouldn’t take it long from here either. I’m waiting to see what happens.
Finally, do we factor in Trump, North Korea and Syria? Well, yes, these could be a catalyst for at least a small correction and if so this will accelerate the points we’ve made.