tactical trader

In part one we looked at the world equity markets and took a glance at the major international markets. Now we can take a look at those international markets in more detail.

United Kingdom - relying on the few

• The chance of the FTSE Index rising now relies on very few stocks performing well. The oil and mining sectors are last year’s story, from now on we depend on the bank shares.

• The UK has performed a little better than the US but not as well as Europe. When the US falls we are bound to follow. The bank led run is the last charge of the current bull period.

• By the end of March, the top of the trajectory, we hope to be well placed to survive a setback. The period of maximum risk is the second two quarters of the year.

In a normal year we wait to sell in May. This time we think that will be too late. We are already late in the bull cycle that started in March 2003. No-one wants to miss out on the last bit of rise in any market but they often do not realise the risk they take for the final modest move. Selling out early and leaving something for the next man, even if it is only a crumb, is the secret to providing sustainable good returns. It also enables you to have the cash available when the bargains come around again. We are not obliged to out-perform some mechanical benchmark all of the time.

The FTSE Index is up 8% in the past three months but it is losing momentum now. It fell 1% last month. The super performance of oil and mining stocks is over for now. We still like them for the long-term, especially BP, but they are consolidating now. At the time of writing, Vodafone is falling and Glaxo is going sideways. The rise in the index now relies only on the banks. Nothing else is big enough to have any effect. In round numbers, the index has always looked as though it could reach 6000. That is now 2% away. All the signs are that this is the final run of the bull.

He who fights and runs away, lives to fight another day. We expect a strong move up to the end of March. We would use it to take risk out of our portfolios. We will then be able to buy the dip and miss the high risk period of the year…