Does The FTSE 100 Tumble Present A Buying Opportunity Or Is It A Falling Knife?

Given that the FTSE 100 is trading as weakly as we’ve seen it since last year’s trade off, it’s a pretty opportune moment to reflect on the first third of the year. I wrote an article early in January that laid out my own thinking on the state of the market where I had mused on the possibility of a short term relief rally driven several factors – the excessively bearish sentiment at the time, dovish monetary conditions and technically bullish profit margin signals. The first 3 months of the year offered up sizeable gains for nimble investors – with at least a 10% rise in the FTSE 100 on top of the gains in December, but the last 6 weeks have given all those gains back. Pretty frustrating to say the least. But there were and still are plenty reasons to be more bearish in the medium to long term, and on top of that with macro concerns consistently flaring up and bankers continuing to show their ineptitude the downside heat is growing. Lets take a look at a few factors.

Technicals

Now I know plenty in the community around Stockopedia who aren’t minded to enjoy discussing anything related to technical analysis, but the reality is that momentum works – it’s been proven in the lab and in the wild to be a persistent anomaly and made many many hedge funds and traders millions. Just look to the work of Josef Lakonishok or others for the proof in the pudding.

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— Guru Focus

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