A couple of weeks ago I was quite happy to go long on the FTSE at 6570, arguing that it was largely range-bound and, as fundamentals weren’t bad, a bounce back towards the top of the range was more likely than not. Eventually that bet paid off.

Today the FTSE has been moving between 6495 and 6540 … much lower than my 6570 entry point on the last bet. And while I’m still inclined to go long I’m hesitating.
When an asset reaches the bottom of the range I generally try to have a good hard think about what (if anything) has changed.

The news stories of the last few days have been downbeat to say the least … bond yields still high … Northern Rock profit warning … job losses at Thomas Cook … BAE probe … Nikkei drops 200 points overnight … and with all this rain in what is meant to be our summer its frankly pretty damn hard to feel optimistic about anything. Even putting Paris Hilton back in gaol (sorry, jail) wouldn’t, I suspect, cheer many people up.

However I’m not too too concerned about all of that. Newsflow is sometimes good, sometimes bad. Every now and then we’ll see a run of bad news that will depress the market. This my sound blasé and I don’t mean to dismiss the importance of newsflow but I do think that whether we get positive and negative news stories is effectively random - a bit like tossing a coin. And like tossing a coin, if you do it long enough sooner or later you’ll get a whole load of tails all in a row.

What’s more worrying to me is the minutes from the Bank Of England’s MPC meeting. The MPC is the body that sets the UK’s interest rates. While June’s decision was to keep interest rates on hold the minutes, which always come out two weeks after the MPC meeting, showed that 4 out of 9 council members voted for a rate rise. That makes the chance of a rate increase at the next meeting (in the first week of July) seem quite likely. Add in comments by Deputy BOE Governor Gieve that he is more worried about inflation than growth and brrrrr, is it just me or is it getting cold in here?

Next question then is whether a rate rise be enough to curb the UK stock market? The answer to that is … anyone’s guess. So far the FTSE has kept rising despite four rate rises in under a year. However sooner or later the increased amount that companies need to pay to service their loans, added on to the increased amount that the purchasing public are paying for the mortgages (and therefore not spending in Tescos, M&S, Next etc…) is going to take it’s toll.

On the ‘glass half full’ side though, company earnings so far this year have been pretty good. Money Supply figures last week were fine (if you don’t know what Money Supply is I’ll explain it sometime … when I have a year or so free). Merger and Acquisitions activity is good. And as long as the corporate sector continues to perform rising interest rates may simply push money from interest-rate sensitive stocks (such as builders, mortgage companies and retailers) into other stocks.

Considering all the above, on the whole I’m still a bull – albeit a worried one.

Using my superior technical analysis skills (stop laughing please – at least I’m trying) I can see some support at 6450. Also its fairly clear the long-term trend is up but the short-term is across to down. If there’s on thing I have learnt it’s don’t trade against the trend – so at the very least I’m going to wait for some sincere upwards movement before I buy.

So I’m still looking to buy – I’m just not quite sure when. If nothing interesting happens tomorrow I’ll probably hold off until 19:15 at least.

May the markets be with you.