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Last week's spike back above the influential band defined as 6491-6556 has been the trigger to ignite such a scenario, and the FTSE 100 is now up by over 200 points since last fortnight's update. With the index far from an overbought reading, long positions should be maintained.
In the UK, with the increasingly irrelevant International Money Fund (IMF) now chipping in, the media and certain media-seeking economists are bemoaning a house price 'boom'. While the do-gooders sensationalise the arrival of such 'bad' news, I sense that privately their animal spirits are reviving at the prospect of their houses being worth more. In fact, I see no evidence of a general house price boom. Certain pockets of the UK, and elsewhere, may be experiencing some good price hikes, but there are many more areas of the country where it is still difficult to find a buyer. In any case, many of the price rises may simply be playing catch-up on the ground they lost since the onset of the financial crisis. It seems some commentators have short memories, too: it is not so long back that many were expressing their fears on what terrible damage might be inflicted on the economy if house prices were to continue falling.
House prices are a free market, and I believe central bankers should treat them no differently to the markets in gold, gilts, orange juice or pork bellies. If prices rise too far, they should adjust. If people are aggressively buying residential property at the current level, then prices are probably a bit cheap. The one key ingredient I can see missing from a full-blown global economic recovery is a revival in animal spirits: our desire to get out of bed, take some calculated risk, and make some money again. Nothing will nurture this spirit more than a rise in the value of our largest asset. Fortunately, in my view, it appears our current batch of central bankers understand this necessity. If single-digit gains in house prices are considered a 'bubble', then let's all sit back and applaud the success of US and UK central bank policies.
The only additions to today's chart are percentage projections from last month’s minor low. Suggesting an 8.33% rise and a 12.5% rise, these both strengthen the target (and resistance) bands at 6922 and 7185.
Recommendation: stay long. Target 6922. Stop-losses can be activated on weakness beneath 6300.