The FTSE 100 Trend - As We See It
We received some emails from subscribers commenting on the 'Where's The FTSE 100 Heading' article in last month's newsletter. Basically they disagreed with our analysis on the FTSE 100 maintaining that in their view the market was still in a bear market (from the turn of the century) and not the bull market as we suggested.
The problem when deciding where any trend lies in any market is always down to your timeframe. A market in a long term down-trend according to your analysis maybe in an uptrend to somebody else's. Therefore the question "what's the trend in FTSE" or even "what's the long-term trend in the FTSE" is almost impossible to answer without some sort of time period being mentioned.
We still maintain that the FTSE is in a long-term uptrend and perhaps it's a good educational exercise to explain exactly how we come to that prognosis. Long term readers of the newsletter will know that we've always favoured very simple charting analysis over complex and this should hopefully be born out by our workings below.
The Definition of a Trend
Trends in our view are characterised by successions of higher highs and higher lows for an up-trend, and successions of lower highs combined with lower lows for a downtrend. We like to look at the market on roughly a monthly basis (still using a daily chart) and pick out the obvious highs and lows. Then, when/if the market (which say was in a downtrend) takes out a previous high and holds that high (hold = able to trade above it for at least 15-20 trading days) we take the trend to have changed. Look at the examples below to visualise this.
