Why FTSE 100 rally is a 'really big deal'

Article written: Sunday, 18 September 2016, 9:27pm

FTSE 100 for the week, AIM, and a story about a potato

We'll get the potato story out of the way first. Regular readers will recall we planted a crop of tatties in an effort to illustrate what happens if you exercise patience. We've finally harvested the potatoes, turning some into chips and can report, rather disappointingly, our potato crop tasted just like potatoes.

We'd somehow thought, as we'd grown them ourselves, that they would be even better than shop bought potatoes. When we produced the potato analogy, it was in relation to AIM and the need for it to better 813 points. And, of course, the need for patience in the interim.

Guess what, AIM still has not managed above our initial 813 points and seems busy inventing a glass ceiling for the market at 809 points. So, close but no banana. Or potato.

However, despite the probability of some near-term relaxation, we suspect anything on this market above 813 will point to a near term growth cycle of 898 and, if beyond, quite a few members of this marketplace will doubtless experience some proper recovery as the future potentials are pretty massive (+50%).

If trouble is planned against AIM, below 800 only defeats the immediate uptrend and wouldn't be a big deal. The market would need crash below 'blue' at 718 currently to scare us silly.

For this week, we have scheduled Cluff, Chariot, Sepura, 88 Energy, and Scotgold as AIM analysis subjects in this, our headline section, unless, of course, anything interesting happens elsewhere.

FTSE 100 (FTSE:UKX)

As we'd expected, the FTSE 100 on Friday didn't really do anything interesting. It did make it above our 6,745 for less than a minute, achieving a day high of 6,746, which was a bit rubbish.

The movement in the closing seconds bothered us as it implies continued weakness below 6,690 will prove capable of reaching 6,670, but the longer term secondary of 6,615 is a nuisance. This would take the UK market firmly into a region where our proposed bottom of 6,550 becomes very valid and viable.

Or in plain English, it promises a grotty week across the market.

However, the FTSE closed the week at 6,710 and need only better 6,740 to exceed the immediate downtrend and give some hope that the rate of descent has eased.

In theory, this would signal the market intends near-term growth to a useless 6,758 with secondary 6,790 points. Achieving the secondary would be a really big deal, giving us ample cause to suspect continued movement to 6,903 is ahead.

If above 6,903, we'd need to stir the tea leaves again to project further.

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.

Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.