Be careful betting against the FTSE 100

Legend has it, Scotland once played Brazil in a World Cup game and a Scottish footballer scored the first goal. He was berated by his team mates for "making them angry".

The FTSE appeared to experience similar emotion when it broke into the 7,500's, with the result that after-hours futures have been a laugh with - at time of writing (Tuesday 21:14) - a ridiculous 8-point range in 4 hours. If the market could talk, would it say "I didn't mean to break 7,500...?" Or is it a lure for folks to open shorts?

In our outlook for the week ahead, we'd given 7,509 as one of our mumbo jumbo numbers, a theoretical thing the market needed to trade above for us to take any rise seriously.

The index closed at 7,522 points, so we need to take it seriously and update our outlook after just two days. The situation now, from a big picture viewpoint (i.e., not in the first hour of trading tomorrow) moves above 7,534 look capable of 7,574 next with secondary 7,632.

The FTSE is behaving with extraordinary strength currently. We'd advocated 7,480 as a major point of interest, quote; "one of these levels we tend suspect some turbulence around." 

With characteristic smugness, we saw the index hit 7,480 at 8:45am and immediately retreat, fulfilling our prophecy neatly with a death spiral of just 10 points.

At 10am, it bettered 7,480 again and didn't look back aside for a six minute pause at our 7,509 level.

We didn't feel complete chumps as, thankfully, we'd remembered to warn of the dangers attempting shorts in a "higher high" marketplace.

Are there any drop-dead obvious places where a short becomes viable?

When we view acceleration since the start of May, the visuals suggest 7,428 is currently a level the market regards important, with weakness below suggesting 7,385 initially with secondary 7,335 points.

And, of course, we've a 'however'. Given everyone and their dog are probably rushing into short positions as "everyone" knows the market must retrace to "test" this or that, this is the FTSE and it's perfectly capable of not doing what everyone and their dog thinks.

And so, again, be careful with shorts as the land of Higher Highs has a dress code and nasty sense of humour. The big picture now claims 7,632 is a serious ambition.

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.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang, Shareprice, or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

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