John Ward close to tipping point., falling FTSE, Global negativity

ANALYSIS: The FTSE’s psychological attachment to 5000 has almost gone. Now what?

Stand by for clutching at straws

Yesterday was an important one for global fiscal and economic matters, and not just because the US financial government system showed itself to be as corrupt as the banks it so clearly represents.

On the basis of poor US growth figures for the quarter, the Dollar plummeted. Concerns about slowing Chinese growth (and a more studied reading of the ECB’s lending data in the eurozone) sent every other major currency on the road down to Rio.

But here’s a thing: despite the Buck diving, Gold dived too:

Traditionally, a weakening Dollar produces rising gold prices – but these are no longer traditional times. This increasingly familiar phenomenon is very probably a mixture of (a) the Fed dumping Gold in the knowledge that poor economic data would threaten the Dollar’s value, but also (b) the markets no longer seeing such a clear relationship between the reserve currency and the gold price.
My own view is simple: if people are nuts enough to sell gold, that gives the rest of us a chance to make even more money out of it in the medium term….and as we don’t get many chances at revenge on the bastards, why not?

Nearer to home, another psychological connection that more or less went by the board yesterday was the FTSE’s desire to defend 5000. The UK’s main index had been ducking and diving around the magic number for quite some time, but yesterday it failed to rally and wound up dropping 111 points down to 4805. So where now? This is what leading wealth managers Full Circle told its lucky clients last week:

‘ We judge that FTSE’s top will complete when it next closes below 5000, at that point we expect its next port of call to be 4100, the July 2008 low’

That sub 5000 closing has now happened. The FTSE did of course go a lot lower than that (to 3498 at one point) and the folks at Full Circle expect that – and worse to occur now. I call their clients ‘lucky’ because FC’s contrarian common sense has made money for its client base in good years and bad – including me. And no, I’m not on commission: I just believe in giving smart integrity a leg up.

The yo-yo period referred to by The Slog in late May is now (I think) drawing to a close. There is too much complexity, incompetence, fear and disturbing data out there; and too much debt, junk-buying, squabbling, crookery or denial for there to be any way back in a hurry.


The straw-clutching days are upon us.