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Here's where the FTSE 100 might be heading
The FTSE 100 (UKX) plunged as low as 5,836 early Thursday, down 124 to its worst level since 24 August. That's when the index hit 5,768 at the peak of the first China crisis.
Merlin Entertainment's (MERL) miserable run continues and the travel industry is taking a bashing - airlines easyJet (EZJ) and IAG (IAG), InterContinental Hotels (IHG), and holiday company TUI (TUI) are deep in the red.
There are big losses at financials, too, among them Barclays (BARC), Schroders (SDR) and Aberdeen Asset Management (ADN). Yet, despite Brent crude loitering around $30 a barrel, BP (BP.) and Shell (RDSB) are nursing smaller deficits than at least three-quarters of the blue-chip index.
(Click to enlarge)
Alistair Strang, a technical analyst at Trends and Targets, tells us what the charts say about the FTSE 100 and where it could be heading next. This article was written before the market opened Thursday.
FTSE big picture and Royal Bank of Scotland
The Royal Bank of Scotland (RBS) issued a pretty vivid "warning", essentially suggesting to their customers that everyone sell everything, dig a hole, put the money in, and go and do something else for a year or so.
While de-ramping comments in share discussion forums can be taken with a pinch of salt, something like this from a major bank might be worth paying attention to.
Don't get us wrong, things in the garden are far from rosy. But from our perspective a few more boxes need ticking before we'd suggest taking a chainsaw to the branch you are sitting on.
Firstly, there's the issue with the FTSE, and our continued droning voice suggesting it wants to head to 5,744. It's unlikely we're the only folks who've noticed the market has resolutely refused to fall off its cliff to our target. Even this week, it looked like it was going to try a kamikaze run, but a miracle ensued.
However, we've little doubt that, should the index now trade below 5,870 [it fell to 5,836 in early trade], then our month-old prediction of 5,744 will probably come true fairly fast. Stop as tight as you want!
In itself, we'd not regard this as the final toll of the bell for further calamity, but should the FTSE make such a movement in concert with, say, Brent crude trading below $28 and gold trading below $1,050, there's a pretty fair chance of RBS actually being right and the market being, to get all technical, screwed!
If it were to break 5,744 against such a background, our best hope would be 5,450 but, visually, just above the 5,000 level makes unpleasant sense.
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As for RBS, this pot isn't (yet) qualified to call the kettle black. Of the retail banks, RBS has not broken its long term uptrend since 2009, requiring to close below 278.78p currently to take the first step off the precipice and a probable 255p.
We're inclined to take some hope from this, along with the slightly resilient behaviour amongst some other market sectors. Property and Builders, for instance, really wants to go up and, so far, has seen prices in the sector enact considerable resistance to the overall market downward pressure.
RBS needs to trade above 307p, currently, to suggest it's price-climbing out of the swamp, as this should signal an early - useless - 310.25p. The critical thing is, if the share were to trade above 310.25p, we'd take it as an indication bottom is "in" and look for continued oomph to 320p - and another look at our tea leaves. The reality is, we need RBS to trade above 380p or so before we'd dare mention it back on track to a long-term 570p.
As can be guessed, we're taking a holistic view simply because things don't feel the way they did in 2008. Back then, we knew we were on a bus crashing. Currently, it feels more like a bus being driven by someone reading an upside down map.
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.
|ABERDEEN ASSET MANAGEMENT||269.35p||0.58%|
|SCHRODERS PLC VTG SHS £1||3,052.39p||-0.25%|
|ROYAL DUTCH SHELL||2,177.81p||-0.49%|
|INTERNATIONAL CONSOLIDATED ...||506.87p||-0.71%|
|ROYAL BANK OF SCOTLAND GROU...||250.80p||-0.40%|
|INTERCONTINENTAL HOTELS GROUP||3,784.58p||-2.43%|
|All data 15min delayed as of: 18:05:43 22/02/17|