Jump to content

FTSE topping pattern & implications


Guest TradingMotives

Recommended Posts

Guest TradingMotives

I track FTSE250 on a regular basis because it is a large index & has proven it's worth as a bellwether.  While obviously correlated with the FTSE100, it also has very good correlation with $SPX. The reason for posting this commentary is that the FTSE250 monthly shows an important topping pattern called an expanding pivot (using Dr Alan Andrews terminology (pitchfork fame)). This is also known as a "broadening top" for Classical Charting & a 5-point reversal (Gartley). These signals are not common on long term charts & while there is still a probability that the pattern might fail, the first significant retracement will give a lot more information. 

FTSE250 topped 5 months earlier than $SPX in 2007 & also found a bottom in 2008 relative to the $SPX in 2009. The two seem well correlated, but FTSE250 can lead as shown historically. The green line on the FTSE250 chart is SPX (for comparison).

For those not familiar with this expanding pivot pattern, there are examples on $DJTA weekly (2008), $XJO weekly (2007) & more recently on $TSX300 weekly. 

Why do I look at monthly & weekly charts? Helps to keep me focused on the big picture, so I can trade the smaller picture more effectively. The first retracement on weekly & daily will be very important to watch. 

tradingmotives.com

MCX.X FTSE250 M 20181023.png

$TRAN W 2008.png

$XJO W 2007.png

$TSX300 W 20181022.png

Link to comment

Yep @TradingMotives I recognise the expanding wedge pattern as an ending pattern when things get volatile in the battle between Bulls and Bears before an eventual capitulation and reversal.  However as I don't see this on any of the main markets I am unconvinced we have yet seen the top out.  It could well be that we have seen the top on the smaller Cap markets, that would be seen as more risky, and a shift into large Cap (relative safety) could push a final leg rally.  Given I can't see a similar correlation with the Russell 2000 (the US equivalent) and a general lack of correlations, I would not be betting the house on the FTSE250 at this stage.  No hurry to diagnose this one as if it is the end there is a long, long way to go.  You don't want to get caught in a short squeeze is the markets stage a significant rally...

  • Like 1
Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
      21,170
    • Total Posts
      90,690
    • Total Members
      41,273
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    toshendra
    Joined 27/01/23 19:31
  • Posts

    • I am a beginner, and I must say, there are a lot of rules to the trading game that one must abide by if they want to be successful.   Here, the writer mentions several basic rules for day vs swing trading.  However, I find that often times, the reasoning for these rules is not as  obvious for a beginner as it may be for an expert.   The 'why' factor if I may. For example, why must you have a large capital to trade with as a day trader? Because your positions must be large so that a small change in price will be augmented and turned into a large profit. Also, with such high risk, the margin will be specially high, given the trader is taking up large positions at a time.  Without a large amount of capital, positions may be forced to close due to funds being below margin requirements.  When this happens, you can expect to lose tons of cash, fast.  I learned the hard way. All the best, David Franco      
    • USDJPY has been regaining ground this week, but inflation differentials and a three-month trend signal the potential for another turn lower Source: Bloomberg      Joshua Mahony | Senior Market Analyst, London | Publication date: Friday 27 January 2023  USDJPY set for third monthly decline The USDJPY pair has been on the slide since its October high, with the historical 147.63 resistance level ultimately marking the end of the dramatic 21-month rally that saw the pair gain almost 50%. Much of that came through a period that saw US inflation soar as Japanese prices remain subdued. That disparity remains, but the direction of travel has certainly shifted as US CPI declines and Japanese price growth gradually ticks up. The overnight 4.3% figure for Tokyo core CPI represents a four-decade high, with the nationwide figures likely to follow on. The chart below highlights how USDJPY has been heavily correlated with the now tightening gap between US and Japanese inflation. However, it is more evident when shifting that inflation differential forward by seven-months. That close correlation highlights the potential for further downside as long as prices continue to trend in a similar manner. Source: ProRealTime Looking at the daily chart, the recent rebound has taken price up towards the top-end of a descending channel and Fibonacci resistance. This highlights the bearish pattern that has been playing out, with lower highs and lower lows in place in recent months. Unless we see price rise through trendline and 134.77 resistance, another turn lower looks likely for this pair. Source: ProRealTime
    • @MongiIG Hi - You recently covered Long NICKEL Trading the Trend and A. Rudolf did this morning but I see it is Closing only. Please clarify, Thanks D600
×
×
  • Create New...