View from City Road: Your guess is as good as theirs
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Your support makes all the difference.Whither the stock market? If you want an answer, don't ask the chartists. Since its peak on 2 February, the FT-SE 100 index has fallen nearly 15 per cent. Most people would call that a bear market. Not Robin Griffiths, James Capel's resident chartist, however. To him this is 'a setback in the late stages of a bull market'. There's still a chance to sell, provided you hold the kind of stocks that might rally this late in the cycle.
Unfortunately, no two chartists can ever agree on anything. Other technical analysts (as they sometimes prefer to be called) believe there is a growing risk of the Footsie tumbling all the way to 2,500 - a long-term support level that should halt the slide but do little to push the market up again.
What does Mr Griffiths think of that? If the market fails to rally back through 3,050, an important break point, then it's dead, he says. If it stays below its 200-day moving average - 3,200 - for any length of time, it's also dead.
Some charts point to support in the 2,800 to 2,900 region, forming a base from which the Footsie could gallop towards the previous peak of 3,520. David Charters (yes, that's his name) of Investment Research of Cambridge thinks that this rally 'will be the last chance you have to sell'. But then again, he could be wrong. David Fuller, the most famous British chartist of them all, thinks that as the number of targets on the way down begin to multiply, as they seem to be doing at the moment, then that's a signal to buy.
Fundamental analysts dismiss all this as obscurantist nonsense. Not that their record has been too good of late, either. Most have had their theories blown apart by the unpredictable activity of the hedge funds, and by other derivative-linked speculators.
The truth is that the UK stock market can't be analysed in isolation any longer. Its behaviour is increasingly linked to what is going on in bond and equity markets around the world. The crash in bond markets caught virtually everyone on the hop. Chartists no doubt have their place in the order of things, but their advice is often little more informative than that stockbroker of legend who told his client: 'The market may go up, it may go down, but not necessarily in that order'.
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