Investing.com UK - Financial Markets Worldwide
⚠ Q3 Earnings Alert! Plan early for this week’s stock reports with all key data in 1 placeSee list

FTSE 100: Bearish Sentiment Will Be a Drag

ByThierry Laduguie
Published 24/09/2014, 07:59
UK100
-

Sentiment is bearish as indicated by our BTI (sentiment indicator), when sentiment is bearish the odds favour a decline. Therefore it is possible that the decline will extend in the short term. Yesterday's sell off occurred on positive news, but investors are growing concerned about the pace of economic growth. We must remember that a few days ago ECB president Draghi said the ECB will do everything possible to boost growth and in the US quantitative easing is coming to an end because the Fed is happy with the pace of economic recovery.

In China the latest reading of manufacturing PMI was encouraging so why the sell off? Investors are pointing to Europe's weakness as the reason to sell, and the fact that China is in no hurry to add more stimulus to boost its economy.

A more plausible reason is that sentiment has turned bearish. The thing is, bearish sentiment is like a bear market, both start when they are least expected. A few days ago no one expected a sell off. Let's face it, the news is not that bad, yet stock markets are going down because investors do not feel confident to own stock. That's what we call bearish sentiment and as long as investors feel that way good news will fail to rally the market.

The question now is: are we in the early stages of a new bear market. A few days ago I showed a monthly chart of FTSE 100 showing a long term decline to 4000. I was expecting this long term decline to start after a rally to 6940. Well, the way the FTSE fell yesterday and the fact that sentiment has turned bearish early could be the first indication that the bear market is already underway.

FTSE 100: 2 Hourly Chart

Latest comments

Loading next article…
Install Our App
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.