'Hindenburg Omen' foreshadows imminent FTSE crisis, warns BGC's David Buik
Will the stock market crash or will it soar to new highs?
Opinion was as polarised as ever on Friday, as one market commentator said shares could be riding for an imminent fall, only days after a respected investor predicted the FTSE 100 would hit 6,000 before the end of the year.
In his daily morning note, David Buik at BGC Partners drew attention to the Hindenburg Omen, which he described somewhat theatrically as "easily the most feared technical pattern in all of chartism". Those of a wary disposition also noted the date - Friday 13th.
The Hindenburg Omen is said to be a statistical sign that equity markets are heading for a fall and measures factors such as the proportion of shares registering 52-week highs and lows, as well as a somewhat complex ratio known as the McClellan Oscillator.
Despite several days of falls the London market closed up 9.38 points on Friday at 5,275.44 - 725 points below what it needs to rise to meet the prediction of Standard Life Investments chief executive Keith Skeoch who predicted on Thursday that the FTSE 100 would hit 6,000 before the end of 2010.
"The FTSE 100 is not just linked to the state of the UK economy as almost 70pc of profits are generated abroad by companies who have good exposure to emerging markets, which will support share prices," said Mr Skeoch in a bullish presentation.
A plague on both their houses, says SwissInvest strategist Anthony Peters, who dismisses Mr Buik's dire warnings and Mr Skeoch's unrestrained optimism.
Asked for his view on Mr Skeoch's prediction, Mr Peters said: "The economy simply doesn't justify that rise - there's no top-line growth at the moment.
"It's simply not feasible that developing world consumption can make up for the fall in demand in the developed - the global economy is going to have to shrink," he said.
Mr Peters points out that whatever anyone's views on the UK market, any discussion in the middle of August is meaningless given that most institutions will not make significant asset allocation decisions until at least the second half of September.
The divergence in views on the market is seen in the latest UBS market figures, tracking fund manager buying and selling.
The figures published on Friday, show that long-only investors began selling the stock market last month, having been buyers of equities since April, while hedge funds from reducing their exposure to shares became buyers around the same time.
Of particular interest is the types of shares investors have been buying, with funds piling into those of companies with cyclical businesses that are likely to do better in the event of a recovery.
By contrast, defensive businesses that would be expected to do better in the event of a worsening outlook have been sold off by investors, indicating that fund managers for now remain optimistic.