LONDON – NOVEMBER 22: A woman walks past the logo of the London Stock Exchange as it is displayed on a screen in the foyer of the London Stock Exchange on November 22, 2006 in London, England. The London Stock Exchange was founded in 1801 and iis one of the largest stock exchanges in the world. (Photo by Scott Barbour/Getty Images)
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I like my Crayola charts.
Technical analysis can easily get mired in complexity. The brain is a pattern-matching computer, and if you give it enough random guff, it will see patterns. Who hasn’t seen a running animal in a cloud, or a face in the pattern of a marble slab or decorative curtain? (Well, I hope you have, or I’m back on the meds.)
As such, drawing lots of lines on stock charts can lead to nothing more than 50/50 guesswork. In the end, it’s easy to think you’re smart if you’re right half the time. Sadly, it won’t boost your brokerage account.
So, in uncertain times, I like to keep my charts as simple as possible.
Remember, charts are excellent at predicting the past! (Hold that thought.)
So, how about this chart comparing the U.K. and the U.S.?
The FTSE 100 chart looks sad compared to the Dow Jones
Credit: ADVFN
For a Brit, it’s sobering.
It’s a picture of abject failure.
But what now?
As regular readers know, I like a hockey-stick chart. As such, this is interesting:
As regular readers will know, I like a hocky-stick chart. As such, this is interesting:
The FTSE 100 chart could go up or down
Credit: ADVFN
There are so many reasons to be bearish, but I’ve got an itch that this is a bullish picture.
The good news is that the setup is simple. I’ll get out my Crayola and scribble:
The FTSE 100 setup – watch for the breakout
Credit: ADVFN
It’s a setup so old it’s almost invisible. When the FTSE breaks out of this box, it’s going to ride.
To me, the probability of it going up is about 70% – for you British gamblers, call it at least a 2-to-1 favourite.
Morale in the U.K. is the lowest I have experienced in my lifetime, including the depressing 1970s, so it’s deeply contrarian to imagine that the U.K. can get its stock market mojo back. But we should trade what we see, and the signposts are there.
If we get through 11,000, what happens next could be epic.
If we fall through 10,000, that will probably be epic too – but not in a good way.