FTSE 100: Where growth to 7,430 is 'again believable'

Written Sunday, 23rd April 2017 - 22:31

FTSE for the week (FTSE:UKX)

Even by our usual standards of gullibility, it'll probably be silly to anticipate the market to make much sense in the next few months. A combination of National elections, local elections, French elections and Britain's Got Talent will doubtless foul things up.

However, with wide parameters, we still hope to get things right. This approach was valuable last week when we speculated exclusively for Interactive Investor (for the week ahead to be honest) of weakness for the FTSE 100 below 7,298 bringing 7,115 points.

Thanks to the UK Prime Minister, it happened the next day. Unfortunately, not every day spawns a 183-point drop from trigger, but it's worthwhile giving the bigger picture viewpoint just in case someone else does something daft.

Oddly, despite Mrs May's somewhat hysterical nod to democracy, the FTSE still isn't entirely stuffed, but should it discover a reason to trade below 7,037 points, we're looking at initial reversal toward 6,920 points, maybe even 6,750 if the initial level breaks.

While this may seem stupid, given the market's recent flirtation above 7,400 points, a scenario such as this comes close to being a "print this and pin it on the wall" statement.

Visually, the prospect of 6,750 isn't entirely insane, given it matches a bunch of lows during 2016.

Perhaps there's a glass floor in the waiting at such a point, as movement below 6,750 promises to be really very grotty. For light relief, we've drawn a line around the 6,300 level!

However - and this is important - the market still has not committed to lemming territory with the result that not much is needed to provoke optimism. The FTSE closed the week at 7,122 and 'only' needs to better 7,190 to escape the immediate downtrend which is making the foregoing possible (not yet probable).

A miracle above 7,190 looks capable of promoting an initial useless 7,209 points. The secondary target, if such is bettered, calculates at 7,280 and capable of bettering the light blue downtrend.

This would effectively scupper all the drop potentials given early and catapult the index into a region where growth to 7,430 is again believable.

Fingers crossed time, unfortunately.

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.