Is FTSE 100 doomed?

FTSE for Friday (FTSE:UKX)

Life used to be simple. A request for a rope swing to amuse grandchildren ensured, rather than watching the FTSE, a massive engineering project was undertaken. Didn't we once throw a bit of rope over a branch and tie a handy stick to the bottom? If the rope broke, the stick broke, or the branch broke, it was all part of the fun. Wish I'd stayed indoors watching the FTSE fake everyone out!

Actually, producing a swinging bench seat for 5 and 3-year-old girls was to prove fascinating. There seems an imperative that neither child throttle themselves, along with the risk of their mother and grandmother wanting a go on the swing.

In fact, there's a real risk all four of them will insist on a photo opportunity, therefore a single plank for a seat was out of the question. Instead, imagine a park bench without legs, suspended from four ropes which required the most ridiculous level of engineering to ensure the finished contraption remained horizontal. Worse, the "park bench" needed a roof to ensure the ropes remained clear of the occupants.

We've now got the ability to swing above the pool at the bottom of the waterfall and better still, it actually receives a decent wireless signal. Unfortunately, this is Scotland and summer happened a few months ago!

Sorry, really nothing to do with the FTSE, but it was a truly surreal day, punctuated by [exclamation] when the FTSE finally broke below 7,430. This risks being an official "bad thing" as it wasn't supposed to happen.

From where the index closed Wednesday, we'd fully expected a visit to 7,430, but with the bounce lasting until 10am, it seemed wisest to find something else to do for a while.

By lunchtime, we felt able to alert clients the next bottom potential was at 7,381 points with this achieved just after 3pm. Unfortunately, despite the market bouncing a bit, our 7,381 was broken and it left a sick feeling for the future. Worse, gold has broken above $1,282, a long-term downtrend. Traditionally, if gold blossoms, the markets risk a bit of a pounding.

According to our tea leaves, if the FTSE now wanders below 7,375 points, we should anticipate near-term weakness toward 7,315 points. Secondary, if broken, is a pretty dire 7,210 points. Surprisingly, the tightest stop level looks like 7,400 points, rather generously tight for a 165-point trade.

Experience tends to suggest the market is rarely this generous as a 25-point stop for 165 points tends not come along too often. In fact, generally, if this sort of thing occurs, we smell a rat as it's often an indication the market has over-reacted.

What happens if the FTSE betters 7,400?

Firstly, it ticks an important box and hints bottom is "in".

Secondly, we'd hope to witness near-term growth toward 7,435 initially. If this level is bettered, we're calculating a return to 7,481 points. Which is just weird. If triggered, we can again show a tight 25-point stop, but realistically we'd prefer 7,360 as the stop level, simply due to a prior FTSE futures low.

It's funny, our two FTSE articles continue being our most popular output. When we view our website statistics, in addition to UK readers, we've visitors from Singapore, NY, South Africa, UAE, and most European countries. And one bloke in Moscow, so "hi Mr Putin".

The reason for highlighting this phenomena is it suggests that despite a UK media constantly downplaying our country, the reality is of worldwide interest and rather flatteringly, our stuff seems to matter.

Have a good 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. 

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.