US stocks on Monday hit a new all-time high on continued executions of post-election buy programs and, possibly, speculation on OPEC supply cuts. Some traders will buy, despite the high prices, on the belief the markets are in a rally. Contrarians may fade it. And some feel nervous about either position. Consider the FTSE 100 instead.
By Vikram Rangala
Monday, November 21, 2016
All four US stock indexes hit new highs Monday, as crude oil rose sharply on speculation that OPEC is likely to agree on cuts in output. A signal from Iran's oil ministry boosted optimism that the oil cartel will agree to a deal to reduce output and curtail global supply.
Iraq announced that it would offer new proposals to help OPEC member countries come to an agreement at next week's meeting in Vienna. The US dollar index dropped for the first time in 11 days and Treasuries rose.
The day's rally by the S&P 500 Index, the Dow Jones Industrial Average, the Nasdaq Composite Index and the Russell 2000 Index to new highs was the first time all four had reached new records together since 1999 at the height of the tech bubble.
Now, if all of that highest-high, unprecedented, how-much-higher-could-it-go excitement is not your cup of tea, you're not alone. Some traders may see a possible buy opportunity—but only a few weeks from now if and when the market pulls back.
Others see it as a possible top formation in the making and they start to look for short-selling opportunities. Maybe today, maybe later on. And all of those maybes make some traders hesitant to even touch a market making a new all-time high.
And with all four US markets topping simultaneously, that leaves some index traders looking overseas. The FTSE has been behaving similarly to the US markets in the last few weeks—but with some differences. It plummeted overnight because of the US election, then rallied back. Since then it has been in a wedge formation, rather than an upward slope like the US markets.
However, it popped up out of that wedge on Monday and continued into Tuesday morning. For technical traders, that's not an automatic bullish signal. But it is a signal that the market is moving out of its previous pattern. Whether it is going to continue or reverse back down is every trader's individual call.
But what makes the FTSE an interesting choice right now is that it is not at an all-time high. It has some possible retracement to the upside. In the other direction, it also has a medium-term downtrend from the October high to consider. It's a different sort of market and may be worth a look for traders who want to trade index futures but don't enjoy all-time highs except as spectators.
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