The number of cases of covid is currently small in the UK. The UK health minister accounced that she has it, and I surmise that it will now spread rapidly. We are experiencing a calm before the storm. I hope I am wrong, but I think that’s the way it’s going to go. I imagine it’s the same situation in the US. If America goes, we’ll probably all go down.
As I noted elsewhere, the FT100 is in bear territory. My worry is, when markets decline by 20%, they don’t just decline 20%, they like to decline more. I don’t know by how much, but 30% seems reasonable. It could be more, it could be less.
I also noted that near-record 1-day declines haven’t appeared in isolation. So we’ve probably got one, two, or possibly more whoppers to come.
The RSI(14) of the FT100 is at 17.88, as it was a few days ago. Anything below 30 is considered oversold. So we are at levels that we could class as extremely oversold historically.
My speculation that we would have a sharp rebound has been wrong so far.
The declines that we have seen recently seem uncharacteristic of a typical end-of-bull market. My expected behaviour is that bull markets end with a whimper, not with a bang. The declines seem too sharp. It’s the end of bear markets that one normally associates with steep declines.
The fallout from covid has not yet filtered into company announcements, so there’s that to look forward to! According to Stockopedia, the FT100 is on a PE of 14. This is lower than average, but still in what i would consider an average range.
So I think there’s plenty of scope for further falls, especially given the fact that the UK has yet to see covid bite into the UK population and company results.
Stay safe out there.
