Sentiment is still bearish but it's slowly changing, the period from now to the end of the year is bullish for stocks, I would not be surprised to see a rising BTI in the next few days. The Santa Claus rally is eagerly awaited. Before Christmas we have Thanksgiving in the US, stocks tend to rally around that time.
This year however, something is not right, commodity prices are hitting new lows. This is not what you would expect to see in a bull market, will they rally during the festive season? The FTSE 100 is struggling to rally due to weakness in the three major sectors; banks, oil and mining stocks. Crude oil is falling again, weakness in Chinese economic activity is keeping investors on the sidelines.
In a bearish environment you would expect the stock market to go down, despite the potential rally in the next few weeks I prefer to remain neutral. There is a good chance the FTSE will drop in the next few days before the rally starts.
The rally in the US has been sharp, October was a very good month and as a result I expect some profit taking. This phase is currently underway. The FTSE is forming a rounded top, on the daily chart prices are slowing turning down below the 200-day moving average. There is resistance below the 200-day moving average [6654], whether or not the index can rally to that level in December remains to be seen. The major sectors are too weak, and for that reason I don't think the FTSE can rally above 6600. Wave B of a potential upward zigzag [A,B,C] is nearing an end, the next move will be wave C up and the target is 6570.
