The pound extended against three other currencies yesterday. it is bouncing today in reaction to the prime minister’s speech on the negotiating posture the UK will take with the EU on Brexit. This bounce will probably continue and we have bought some £/$ (called ‘cable’).
The FTSE made a top extension (finally) a few days ago and is now dropping a bit. It has been greatly supported by the weakness in the £ as 70% of the earnings of the companies in this index are in other currencies, so it has seemed cheaper and cheaper. This top extension, combined with the signals shown above that mean the £ should now reverse provide two reasons to sell it short and we have done so.
In other news, China made a bottom extension yesterday that should end the recent weakness. Buy it if you have access – we do not. This means that the equity market divergence we described in the last edition is likely to continue around the world – the FTSE and this Chines index have produced opposite signals.
All signals generated by software supplied by our friends at Parallax Financial Research www.pfr.com
