What to do if FTSE 100 tumbles

FTSE 100, Ferrari and it's Friday too

A long, long, time ago, Fridays were generally a good day on the markets. It was always pleasant to complete the week on a high note, but this year the markets rarely meet expectations on a Friday - other than in the late afternoon session, which generally gives us a dose of fake optimism for the following Monday. And, of course, Mondays usually stink.

What was a bit weird comes from movements on the FTSE 100 during 12 May. We'd spent the morning being impressed and finally felt we'd a grip on what the markets were up to. This comfortable state of affairs lasted until 2pm, when the FTSE fell off a cliff.

The unpleasant situation now is of weakness below 6,094 heading to an initial 6,062 with secondary a hopeful bouncy 6,031 points. If opting to open a long position, should 6,031 make a guess appearance, it appears a stop can be emplaced 20 points lower - which isn't too insane.

The funny thing is, the Dow Jones experienced a miracle recovery during its evening session, which results in a situation where we can hope the FTSE will be opened up - ideally above 6,118, as this allows improvement to 6,130 initially, with secondary 6,146 (the original article was written at 11:54pm last night).

The secondary is quite a big deal - it betters the immediate downtrend since 2pm yesterday and allows further oomph to 6,160 and hopefully beyond.

Ferrari

We like to pretend Fridays are just another day, but when they coincide with a Grand Prix (GP) weekend and the weather outlook doesn't mention monsoons, some enthusiasm for the coming weekend becomes apparent. Even if it is only the Spanish GP.

Once again, though, we've a reason to monitor Ferrari, as the share price still has not shown a causal link with race performance. In fact, if we believe share price movements are an indicator of Ferrari performance, it seems there's a probability of the team experiencing a pretty grotty weekend.

However, believing share predictions will drive fundamental performance is stretching things a bit. At least, it would be if it were not for the unpleasant detail we've a track record against this sort of thing. Recently, Man Group opted to fulfil a movement projection we'd had in place since January.

So, if the charts are right, Ferrari is probably going to experience a grotty race and their share price will drop to $39. We'll add a couple of caveats, due to our wimpish nature. Firstly, currently trading around $43.2, it needs below $42.5 to make weakness to $39 almost inevitable. The thinking behind this is painfully simple - we're demanding a "lower low".

Secondary, there's another reason we're a mite cautious. Should Ferrari achieve $39, it moves the price firmly below the pretend glass floor at $40 and logic demands continued punctured dreams, to a hopeful bottom of $35.6.

Of course, we've still not proven a link between NYSE:RACE and race results, but the current situation is indeed fascinating. Our magical trend tool now advises Ferrari needs to trade above $45.6443 (roughly) to indicate it has once again entered the race toward $52. In fact, if the price even now betters $43.7, we anticipate near term acceleration toward $44.9 with secondary a trend-breaking $47 - an official "higher high".

And as for the GP itself, ideally Alonso will be taken out some time in the first lap so a proper race can commence without constant harping on about Spanish support for their local hero and TV coverage showing obsessive interest in the wrong car (that's our pet grump out of the way!)

In summary, it's Friday; Ferrari, FTSE and fingers crossed! Four 'F's and hopefully a thumbs-up for Spain. And remember, the above refers to the FTSE during trading hours, not futures.

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.