We discussed the probability of the FTSE reaching 5500 on Friday if we did not see the crucial move below key support at 5360. The FTSE has now risen over 600 points in 2 weeks, we have 5 waves up and conditions are now overbought so a short term correction is due to around 5250 even if we are too see higher prices towards the end of the year which at the moment is looking likely. The FTSE could reverse at any time however trying call a top is never a good idea. What investors can do is gradually build some short exposure when markets reach over bought conditions and once the market turns down they can then add to the short positions. The reason why I mention this is bear market rallies can be relentless and market conditions can remain over bought for some time. This has the effect of ''squeezing'' those traders who are trying to pick tops with large leverage. It is usually at the point where these traders can no longer stand the pain and close their positions, that the stock market reverses to confirm their view.
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