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FTSE 100: The Rally Is Nearing An End

ByThierry Laduguie
Published 30/12/2014, 07:53
UK100
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US500
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LCO
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CL
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The FTSE 100 is ready to decline but the S&P 500 is still holding near record levels. The next move should be down, unfortunately with many traders away we may have to wait until next week before the decline starts. A pullback is due and this pullback could easily morph into a larger decline because crude oil is plunging again.

Lower oil price is good for the economy but at the same time it indicates slower global growth in 2015. Brent crude drops towards five-year low but I don't believe it's due to rising supply and OPEC's reluctance to cut output. A drop of more than 50% in the price since June cannot be attributed to producers, why would producers hurt their own economies by supporting actions that will result in lower prices?

In 2015 we can expect US interest rates to start rising, this is another negative development for the market. I expect market participants to take notice in early January when they return to work. They will also take notice of the 6 percent gain in the S&P in the last eight sessions, and 2014 is not yet over, the S&P could rise further before 2015 starts. Investors have become nervous in recent months, when the market rises too far too fast they rush for the exit. For this reason there is a good chance the stock market will sell off either now or in the New Year.

In 2015 I expect the FTSE to continue to lead the way and drag global stock markets into a global bear market. The FTSE is already in a bear market but the S&P is not. Sometime next year the divergence will end and chances are the S&P will catch up with the FTSE. But in the short term a second wave up is underway, this pattern has a final down/up move to come. A decline in early January should be followed by a rally to 6700.

FTSE 100

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