FTSE 100: What happens if this level breaks?

FTSE for the week (FTSE:UKX)

Understandably, the UK market is proving a little volatile currently. On Friday, the index had signalled pretty firmly it intended to droop, this notion lasting until it became clear we're to be governed by an amalgamation of clowns.

Unsurprisingly, the jokers at the FTSE took this as good tidings, presumably because another general election being called immediately would be a bad thing. Stuck in the middle, between the Clowns and Jokers are of course; the punters...

The immediate situation for the FTSE is of growth above 7,540 bringing 7,555 points, a fairly useless trade, but the important detail comes if the index manages to trade above 7,555 points, as it gives the subliminal suggestion of a bottom being "in" and future growth to 7,595 initially.

If triggered, the index needs to slop below 7,492 to escape the immediate uptrend which calculates with 7,686 as a pretty major point of interest.

In fact, if we're fussy, below 7,462 will tend to trash the upward potentials completely rather than just delay them.

What happens if 7,462 breaks?

Initially, we're looking at reversal toward an initial 7,431 points. Secondary comes in at 7,320 points. If triggered, stop can be at 7,492 and this gives a fairly tight stop for such a large droop potential.

We're actually pretty far from happy with recent FTSE movements - they do not appear designed to confuse or conceal, but instead indicate a market which is pretty fragile.

The defensive movement upward on the FTSE in the minutes following the open on Friday would normally be regarded with the potential to fuel a serious drop. The "however" came with moves during the day session as news of a coalition broke, substantially lessening the threat of an immediate drop.

But similar to the market, we're not entirely convinced, hence proposing a pretty absurd bandwidth between 7,462 and 7,555 before we dare believe moves to be genuine.

Unfortunately, from an immediate perspective, we're aware this is as useful as a chocolate fireguard.

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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