FTSE 100 Gets To The Party Just As The Music Stops

The FTSE 100 has lagged the U.S. and German markets horribly. Those go-go markets have torn through the pre-Covid levels of the pre-crash and look bubbly to even bullish eyes.

Here is the chart:

While many people see a crash coming in the U.S., the question is will the U.K. crash alongside it? That would be kind of ironic, but the market doesn’t care, the U.K. can be in the bargain basement but it can just as easily get lobbed into the dumpster by a U.S. crash.

I’m optimistic, but the bleached bones of optimistic investors litter the markets.

So this is my indicator to flee the small-cap index. The FTSE small-cap index is devoid of the noise that plagues the arb-ed, hedged FTSE that is used as a proxy for so many other trades that big macro moves elsewhere can pull FTSE index companies about like pit-bull savaged rag dolls.

This is what it is saying:

This is saying bounce this week or go into a crash, correction or other steep bear.

While value rallies and value portfolios should escape the worst, much of the index will take a beating.

Are we going to get a lesson in “moral hazard?” It’s a strong possibility and it will be painful. However, the central banks will not allow a crash to undo all their hard work printing because that is unnecessary and also catastrophic for all in the short, medium and possibly long term.

If the FTSE small-cap goes down much more, then it’s time to wave so long to the FTSE and its recovery.

We will see in the next few days.