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FTSE 100 Is Deeply Oversold

ByThierry Laduguie
Published 29/09/2015, 08:00

Once again the BTI, a sentiment indicator, changed direction as the stock market is unable to close up or down for two consecutive days. Sentiment is bearish but the timing indicators are oversold and the wave count is nearly complete. Overall it’s bullish.

I have been bearish on mining stocks since 2013, but yesterday what we saw was a complete collapse in mining stocks. It sounds like capitulation, perhaps what happened yesterday is a hint that a bottom is near. That would make sense, if the stock market is about to rally mining stocks should participate.

When I say a bottom I mean a temporary bottom. Mining stocks should resume their downtrend later this year and next. The concerns are China and global growth. This story will stay with us for a long time, until the bear market is over. And even when the bear market is over global growth won’t pick up for another year or two. This bear market will last two or three years so the next expanding phase in the global economy should start in 2019-2020.

Meanwhile the 34-day BTI has dropped below -400 (oversold) and the Top 20 Differential has reached record low at -5% following the collapse in mining stocks. When these two indicators are oversold the FTSE is highly likely to rally. The Top 20 Differential indicates a short term bounce whereas the 34-day BTI predicts a longer term bounce one that will last two weeks or more. So the FTSE is at the forefront of a multi-week rally, this rally is wave 4.

FTSE 100

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