Caution urged on shorting FTSE 100

FTSE for Friday (FTSE:UKX)

The turmoil of the past week has not, perhaps amazingly, been reflected on the markets. However, with other events throughout Europe, similar resilience has been shown by markets with the somewhat worrying concept of markets becoming "used" to terrorism.

We'll prefer to take the mindset there's a lot of 'stiff upper lip' going on with the unpleasant background that terror events like these do not affect economic considerations.

The last four days have shown several suggestions the market wanted a near-term drop, but on each occasion the FTSE threatened a trigger, it quickly recoiled upward.

Situation now exists of movement above 7,530 allowing for an initial realistic 7,571 points with secondary, if bettered, at a rather less likely 7,635 points. If triggered, stop needs be below 7,506 points.

As always, we've a "however", and it came from the point the index closed on Thursday at 7,518 points.

Visually, it broke an immediate uptrend and we're supposed to be concerned.

Given the underlying strength being shown by the market, our inclination is to suggest caution on any short unless the index actually (not in the opening second) trades below 7,498 points as this permits weakness toward 7,480.

Secondary, if broken, comes in at 7,460 points. If triggered, stop can be at 7,528.

Please do remember we're talking about the FTSE above and not out of hours futures. Sometimes, quite a substantial difference in potentials will occur!

Have a good holiday weekend.

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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