Reasons to be bullish on FTSE All-Share

Like the FTSE 100, the broader FTSE All-Share has run out of steam after hitting record highs in recent months. Both indices are sharply lower over the past fortnight - blame Greece and jitters around bond yields and US interest rate policy - but strip out a 1 May spike and the All-Share has fared better. And if the charts are right, there could be substantial upside here for patient investors.

The All-Share has fallen as much as 4.2% since the end of May and the FTSE 100 4.8%. A subsequent bounce back looks increasingly like the "dead cat" kind as the IMF calls time on another round of unsuccessful talks with Greek debt negotiators. And with liquidity likely to be an increasing issue over the quieter summer months, the market's reaction to even the slightest policy error will be magnified significantly.

But Alistair Strang, chartist at Trends & Targets and Interactive Investor contributor, is in a "glass half full" mood. He's spotted a break in a trend which could spell good news for the FTSE All-Share index.

FTSE All Share vs S&P 500

This index pair used to be quite reliable and moved in tight concert as the chart shows. This all changed at the start of 2013 as they diverged. Since then, the FTSE AS has blundered ahead by 19% whereas the S&P has managed a 42% improved. We're noticing a bit of a pattern develop here when we compare UK market changes to others internationally. Essentially, the key message seems to be UK company values have failed to recover with anything like the strength of their international competitors and tends place a pretty big question mark against politicians claims on the UK economy.

Having completed the obligatory grumble, the All Share actually is showing some hope for the future. In the event of it now trading above 3,830, we're expecting growth to an initial 4,050 with secondary at a longer term 4,760. Given it is trading at 3,740 currently, it doesn't need work too hard to bring the UK market into position for strong growth.

And this, thankfully, is where the S&P risks a bit of a slowdown. In the event of the S&P trading above 2,135, the best we can see near term is a fairly lacklustre 2,175. Only in the event of it managing to close above this level would we feel comfortable mentioning a distant 2,450 as our secondary target and this is one of these awkward levels where the world must end if it's achieved 'cos we cannot calculate higher. Ok, that's not entirely true as we've noticed it never happens but we suspect in the event of the S&P 500 reaching 2,450, some fairly major volatility almost must occur if only to give us ammunition for longer-term targets.

It's quite weird that indices conform to these rules, whereas sometimes individual shares simply ignore the rules and keep going. In-house, we've noted Howden cannot now trade above 541p, this being a target level which was initially 510p and has been nudged up on a daily basis due to intraday volatility and some other stuff such as manipulation gaps.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.