FTSE 100: It's next 'proper' move

Created 22/10/2017 at 21:46

FTSE this week (FTSE:UKX)

Recent movements with the market taught one thing. Sneezing while lazily brushing teeth with an electric toothbrush is bad, especially in front of three market monitor screens at 8am on a Friday. The subsequent mess took ages to clean but, alas, the FTSE's intentions remain a bit unclear.

It's unclear what provoked the killer sneeze, but the movement by the FTSE at the open of trading on Friday was not clever.

We hate spikes upward at the open of trade as generally they presage a wasted day. Essentially, it feels like the market indulges all the work for the day during the first few seconds, then leaves everyone hanging.

Our argument remains - if an upward spike at the open is not bettered within the first 90 minutes, why not go do something else.

Also, the converse remains true - if a downward spike occurs at the open, perhaps some excitement is planned for the day.

But, finally, what if a price is gapped up, then spiked up further at the open? There seems no consistent argument favouring what the market is trying to tell us.

We'd certainly be alarmed if the FTSE finds an excuse to slip below 7,482 points in the coming week. It would tend to suggest weakness is coming toward 7,430 points.

Secondary, if such a level breaks, is at 7,345 points. However, we've a bunch of arguments favouring a bounce must occur somewhere between 7,410 and 7430.

Thus, if chasing a bounce, going long at 7,430 with a fairly tight stop around 7,410 shall make sense. Any bounce will be hoping to reach 7,500 initially.

There's a big elephant in the room as the FTSE is already viewed as heading toward 7,630 initially, perhaps even 7,680 if bettered. To cancel this prospect, the index is required to slip below 7,430 points currently.

Despite the last few weeks of relative flatline behaviour, we suspect the next proper move on the FTSE will prove to be upwards.

Politicians permitting...

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.

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