Senior Trading Mentor Ron William contributed to an article on “‘How Will FTSE Fare In 2018?” here is what he had to say:
“The UK’s FTSE100 was reaching all-time record highs into the New Year, fuelled by a global wave of investor euphoria. 2018 was the best start to a year for S&P500 since 1999, marked by the Dow’s historic break above the psychological 25K handle. All these technical new high breakouts are being supported by the highest level of upward earnings revisions since 2011, coupled with extreme levels of market optimism last seen at the peak of Black Monday 1987.
From a behavioural standpoint, it seems that analysts and investors are silencing tail-risk concerns in a precarious trade-off for fear of missing out on the party.The “January Effect” is part of a tried and tested maxim that states “the first week in January goes, so does the month”; and even more importantly, “January goes, so does the year”. So our recommendation would be to see how January plays out as a potential barometer for the next 12 months.
However, keep in mind that we still live in known unknown times; some major markets have not even had a 5% setback in 16 months and the VIX index is at new record lows.Back to the FTSE100, all eyes remain on the next glass ceiling: 8000. While there is an increasing probability that the market will achieve this historic price target, we must also apply prudent risk management as the asymmetric risk of a violent correction remains.The long-term 200-day average, currently at 7422, is key. Only a sustained confirmation back under here would signal a major cliff-drop ahead from very high altitudes. Brexit tail risk will more than likely continue to weigh heavily on it.”
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