How FTSE 100 can hit 6,800

Something a little odd happened with the FTSE 100 on 10 November - but then again, 2015 has been a litany of oddity on the UK's main market. During the trading day, we monitor the Footsie itself rather than depend entirely on what futures are saying. But when I knocked together our lunchtime report for customers, a glance at how futures have been behaving threw up something fairly important.

For some reason, the futures market has defined a glass floor for the FTSE 100 at 6,253 points. When you look at the index itself in real time, it's quite hard to discover what the heck I was looking at, the reason being the defining moments happened once the UK session had closed and the futures were enjoying a drunken slumber in parallel with the rest of the world.

What was of interest was that London achieved a low of the day at 6,250 around lunchtime, which proved that this 6,253 glass floor could break in real time. The futures market threw a hissy fit, immediately dropping to an unimpressive 6,249 points.

The next bit is a little complex and it relates to members of the FTSE 100.

The market plunge of 24 August didn't happen with shares being traded down. Instead, we'd seen shares being gapped down at the open over the preceding week as the market seemed intent on scaring people silly. This remorseless behaviour has created a plethora of strong market components experiencing "housekeeping" as the market plays hunt the manipulation gap. As an example, we're seeing this against Kaz Minerals, Glencore, Rolls-Royce, Lloyds etc.

Those shares which did not suffer this degree of price movement are unsurprisingly just waffling around, with the notable exception of Anglo American, which is being trashed for some reason. If Anglo were to get below 465p - the immediate drop target - we're hoping 340p will provide a bottom.

(click to enlarge)

The implication of the foregoing is we expect this nonsense against the Footsie to continue until "Hunt the Gap" completes. Further weakness below 6,249 looks capable of 6,135 next from a Big Picture perspective. If the UK closes below such a point my secondary is a bottom at 6,030 points.

Unfortunately, despite the attractive range of short potentials for those with nerves of steel, the market needs better than 6,340 to trash the immediate drop potentials. Given it's currently trading at 6,287 (10 November), that's perhaps an insane stop-loss level, but I'm afraid it's the only one which makes sense.

As with most people, I like fruitcake and there's an appalling fruitcake element to all this. Unless the RED line on the chart is broken, there's a heck of an argument for the FTSE 100 to top out at 6,800 on the current movement cycle. Visually, the implication is of weakness to 6,030 providing a bounce and hopefully an early Christmas present to anyone sufficiently gullible to trust my projections of a series of down and up moves for the next couple of months. It is worth bearing in mind I just wove all this cloth against a three point movement on the Footsie at lunchtime…

Of course, I'm going to watch this like a hawk as it would make a hell of a "Told you so!"

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.