Markets – A Coiled Spring

Spring

Every now and then a stock market opportunity builds quietly around us only becoming apparent that it was an opportunity after facts prove it to have been. For those lucky enough to pick up on these opportunistic signs while it builds, great chances to make good stock market returns abound.

Curiously, London stock markets have lagged other key European bourses throughout recovery from the financial crisis but this is about to change in dramatic fashion. Repeatedly throughout this side of the financial crisis London’s stock markets have attempted to break out into record highs but has been repelled at every attempt – until now!

Signs have been building that London’s main index, Financial Times Stock Exchange 100 (FTSE100 or Footsie if using its anagrammatic pet name) is finally about to have enough upward momentum to break its previous record close of 6930.2 set way back on 30 December 1999, which should release stocks upwards.

Strangely, the longer a market is contained by such a ceiling the more pent up energy gets stored under that ceiling making a significant break out with added gusto more likely. Imagine a spring with a rising floor and level ceiling being wound tighter by the rising floor. Eventually, something has to give. If it’s the ceiling the consequent release of energy can be tremendous at break through.

Stock markets also love big round numbers and they don’t come bigger or rounder than the next thousand, especially if it has taken 15 years to get to that number. 7,000 is only a short hop from a new record close. It is a fair assumption to presume that a new record close will be quickly followed by a close above 7,000 – then clear air above.

In an election year it is worth considering what financial landscape would be perceived by the electorate as conducive to supporting current Governmental policies and thereby most likely to entice voters to re-elect based on financial feel good prevailing during any election. Such a scenario will be sought by the current Government prior to the election.

A highly probable feel good factor would be granted by an improved housing sector. No surprise then that stamp duty reforms were introduced with immediate effect by Chancellor George Osborne in his autumn statement. This gave a healthy fillip to the property sector which is starting to bear fruit.

A glance at house builders shows many are also back at levels seen during the financial meltdown or even showing record closes. A list of those making upward ground is provided below: -

Bovis;   Barratt Developments;   Bellway;   Taylor Whimpey;   Redrow;   Travis Perkins (by way of benefiting as a satellite industry);

Town Centre Securities (due to improved commercial property values). See separate report.

Rightmove. See separate report.

Once London’s Footsie breaks through 7,000 the financial landscape will change so quickly due to 15 years of pent up energy that it will take many by surprise and it will take all those stocks (that the current Government wishes to help portray financial feel good within the populous) with it - just in time for elections.

An imminent break out is palpable right now.

See how other reports are faring! Click here.

Sign in to leave a comment. (requires Free Membership or Premium Membership)

Leave a Reply