A potential rally to 5300

The bearish nature of the BTI is associated with a declining market which is what
we are seeing, but this does not mean the FTSE will not rally.

When the trend is down, rallies which are counter trends, occur on declining BTI.
We saw it in the first three days of February, the bearish divergence between the
BTI (declining) and the FTSE (rising) was a clear indication that the rally was
counter trend and not the resumption of the bull market. Investors are cautious
because they know last year performance will not be repeated. If the conditions
for a rally or a continuation of the bull market are not perfect, they will sell.

Our timing indicator, 13-day BTI, is certainly in a position for a rally. When the
13-day BTI is oversold, the decline is nearing an end, see chart.

The decline is nearing an end also because we have five waves down from the top
on 11 January. The more indicators pointing in the same direction, the better. A
completed impulse wave accompanied by an oversold timing indicator is a more reliable
signal to go long.

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