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FTSE Versus S&P: Bearish Divergence

ByThierry Laduguie
Published 05/06/2014, 08:08
UK100
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US500
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The divergence between the FTSE 100 and the S&P 500 is growing wider, the S&P is making new highs, the FTSE is making new lows. Which one is giving us the direction for the next few days, the FTSE or the S&P? If the S&P is the leading index the FTSE will rally to new highs. Chances are, the FTSE is leading the way and the S&P will catch up with the FTSE. This pattern has been a regular feature in the last year, strong rallies not confirmed by the FTSE are bearish setups.

But today we have some important news at 12:45 (ECB interest rate decision) then 13:30 (ECB press conference). Investors expect some good news from Mario Draghi, stock markets could rally strongly. If they do I d not expect any significant progress as many markets are at or approaching key resistance levels.

There is also another scenario, one in which investors bought the rumour and will sell the fact today. This is a strong possibility because the S&P has rallied continually in the last two weeks on deteriorating fundamentals, an indication that the good news is priced in.

FTSE 100

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