DAX-FTSE spread warning to bulls

10th December 2019

Longer-term 3 month signals have been bullish throught 2019 and our strategy to stay long and buy dips has been the correct one.
However, although there is no clear bearish reversal pattern on longer dated DAX-FTSE charts, signasl in the shorter-end are highlighting warnings.
Initially divergence on momentum indicators, last week the US ending long trend of higher weekly lows at record highs, the persistent underperformance of Europe versus the US and perhaps crucially the potential for the DAX-FTSE spread to be topping.
There is no clear sell signal here yet either, but the loss of topside impetus at the 2017 top is a clear warning to bulls.
The potential for a profit taking sell-off is increasing and although this will probably be sharp and potentially deep, it should be temporary.
Our strategy has been to lighten longs in the DAX-FTSE spread and wait for the sell-off.


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