What FTSE 100 needs to cancel threat of slump

FTSE for Friday & mining sector again

Our humourless comment "unless, of course, we've stumbled across the harbinger of gloom for an entire sector." regarding Anglo American returned to bite us on the bum. On Thursday 4th, the mining sector opted to trash itself, pretty firmly in line with AAL's grotty projections.

When the mining sector index (FTSE:NMX1770) closed the session at 13,884, it effectively announced some grotty sessions ahead for sector members as the market can now be expected to weaken to 13,500 points, perhaps even 13,026 if real full fat misery is expected.

Any attempt to escape the immediate downtrend requires this index to currently trade above 15,070 points (blue line on the chart below).

FTSE for Friday (FTSE:UKX)

Market movements this week haven't exactly been Strong & Stable. In fact, the Stable door was open, the horse bolted, and a Strong smell of that stuff people spread on their roses remains... (Even comedians don't use their catchphrase as often as the UK PM does)

The FTSE 100 seems to have something going on at the 7,220 level as exquisite care is being taken to avoid the market breaching this point.

As a result, it appears that should the FTSE manage below 7,220 we should anticipate coming weakness toward 7,199 points initially with secondary, if broken, at 7,172 points.

While perhaps this isn't a "hold the front page" projection, the attractive thing behind the scenario is - somewhat absurdly - the 'stop' computes at 7,225 points.

Usually, we trust our software, but this one's a bit surprising as visually the stop should be around 7,268 points if the movement triggers.

The FTSE closed May 4th at 7,248 points. Movement now above 7,268 is supposed to bring an initial 7,298 points with secondary, bettered, at a surprising 7,319 points. If triggered, the stop calculates at 7,223 points.

Finally, if the market intends now regain its Brexit uptrend, the FTSE currently needs to better 7,368 points.

In fact, if it were to somehow close this week above 7,290 points, we'd take this as early warning for interesting times ahead.

Otherwise, the market is now trading in a zone where logical bottom calculates at 6,750 eventually. Which sucks!

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.