Sentiment is neutral as I write and the bulls are back in charge after a two-day 
 sell off. The more likely scenario is that the current rally is a counter trend. 
The FTSE is still overbought based on a sample of stocks from the top 30 companies 
by market capitalization (Top 20 Differential). 
Something unusual happened on Tuesday, stocks exposed to emerging markets like Standard 
Chartered and Sabmiller rallied while the general market was tanking. Why? 
Perhaps investors are betting on some more stimulus from China as a result of a 
slowdown in emerging markets. Despite this I would not rush to buy because there 
 are too many potential pitfalls in the near term. The situation in Ukraine is 
worsening and Chinese banks may be facing a new problem, debt. This suggests that 
the safest place in the market is to be on the sidelines. Alcoa kicked off the earning 
season, investors tend to be bullish during the earnings season so this is positive 
for the market. Baring any bad news from Ukraine I expect the rally to continue 
today and possibly tomorrow. 
Another positive development came last night with the FOMC meeting announcement. 
 There was a relief Fed officials are in no hurry to raise rates. But as I said 
this positive influence may not last because the trend in the FTSE is down. Stock 
markets and in particular the FTSE 100 have a good track record at anticipating 
changes in the economy. The FTSE is going down for a reason, will it be civil war 
in Ukraine or bad loans at Chinese banks? Caixin online writes "Bad loans have sharply 
increased for many Chinese banks as more companies struggle to make repayments...more 
are expected to emerge in the second quarter". The risk of another banking crisis 
similar to that of 2007 is high. 
If we rely on sentiment analysis to predict the trend in the FTSE we are well positioned 
to profit from the stock market in 2014. I believe that sentiment provides the easy 
part to predict the direction of the market, the difficult part is to get the levels 
right. When the 13-day BTI became overbought on 20 February the FTSE turned down 
 a few days later. During the decline sentiment turned bearish on 12 March then 
the next day the 13-day BTI became oversold, an indication that the FTSE would rally. 
The indicator was right, the FTSE rallied from 14 March to 4 April. On 4 April the 
Top 20 Differential was overbought, an indication that the FTSE would decline. Once 
again the indicator was right, the index fell sharply in the last few days. Prices 
dropped below the 200-day moving average for the third time in a month, it would 
 appear that weakness in the FTSE relative to S&P 500 will translate into a long 
 term decline and we are nearing the start of this long correction. 
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Thierry Laduguie 
e-Yield 
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