LIVE MARKETS-Playing FTSE with the Dow

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

PLAYING FTSE WITH THE DOW

In John J. Murphy's 1991 book "Intermarket Technical Analysis," he notes a tendency for the British market to lead the U.S. stock market at tops.

Although perhaps a controversial notion to some elements of the trading community, Murphy provides a number of visual examples of this phenomenon which were seen in early 1986, late 1987, and late 1989.

Looking back further, he writes that "U.S. stock market peaks in 1929, 1956, 1961, 1966, 1972, and 1976 were preceded by tops in British stocks."

More recently, around the Y2k U.S. top, the FTSE 100 index's .FTSE record closing high was on December 30, 1999, whereas the Dow's .DJI record closing high was on January 14, 2000. Thus, the FTSE led the Dow's high by 9 trading days (tds):

Ahead of the 2007-2009 Financial Crisis, the FTSE had not exceeded its 1999 record high. Instead, it put in a lower high on June 15, 2007. The Dow peaked on October 9, 2007. Thus, the Dow's 2007 high was 1964 tds after the FTSE's 1999 peak and 81 tds after the FTSE's 2007 high.

Ahead of the late 2015 - early 2016 market swoon, the FTSE topped on April 27, 2015. The Dow's high was 15 tds later on May 19, 2015.

Prior to the late 2018 market slide, the FTSE topped on May 22, 2018. The Dow's closing high was 94 tds later on October 3, 2018.

Ahead of the early 2020 pandemic collapse, the FTSE had yet to exceed its 2018 peak. It did put in another lower high on January 17, 2020. The Dow's peak was on February 12, 2020. Thus, from its 2018 peak, the FTSE diverged for 438 tds into the Dow's February 2020 record close. The FTSE diverged for 18 tds from its January 17, 2020 high.

And ahead of the 2022 bear market, the FTSE's 2018 high was still intact. The Dow topped on January 4, 2022, or 916 tds later.

Obviously, timing can be blunt as over the last 25 years of so, FTSE peaks have preceded Dow peaks by as little as 9 tds or as much as 1964 tds. Nevertheless, the phenomenon has continued to hold.

As stands now, the FTSE has been making fresh record highs, whereas the Dow ended Tuesday down 2.2% from its record closing high.

That said, based on this theory, with the FTSE having yet to peak and diverge into a Dow record high, it would appear that the U.S. market's elder statesman still has both time and room to run.

(Terence Gabriel)

*****

FOR WEDNESDAY'S EARLIER LIVE MARKETS POSTS:

DECIPHERING THE BOND MARKET'S UNUSUAL SELLOFF - CLICK HERE

WHY ITALIAN SMIDS WILL OUTPERFORM IN 2025 - CLICK HERE

TRUMP'S AI PLEDGE OUTWEIGHS TARIFF FEARS; STOXX AT RECORD - CLICK HERE

EUROPE BEFORE THE BELL: FUTURES UP AS TRADERS DIGEST TRUMP COMMENTS - CLICK HERE

THEY DO KNOW STARGATE IS SCI-FI, RIGHT? - CLICK HERE

(Terence Gabriel is a Reuters market analyst. The views expressed are his own)