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 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 prominent number position which often affects the chart. Moreover, we have a measured move up to its present location from the 2014-2015 high and low. It would also seem 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 pullback to be a flag rather than a ‘major’ reversal. Possibly the next 2 to 3 months may see a pullback; this, I think, will probably be bought by the bulls and the market pushed back up to the high of the significant 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 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 virtually at a significant number. I 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.