FTSE 100: An analyst's view of the stock market recovery

by Alistair Strang from Trends and Targets |

The City index has rallied strongly, but are these near-term rises viable?

FTSE for Wednesday (FTSE:UKX)

Unable to recall seeing a 9% 'up' day on the FTSE 100, intraday traffic certainly deserved some scrutiny. The big surprise came from the FTSE "closing" number of 5,446 points.

This was a shock because the FTSE actually closed at 5,367 with a 7.5% rise.

Everything else came from the mystery moment of the day, called "clearing".

For the average punter, even a 7.5% day gives some considerable hope.
 
Annoying to say, we hadn't bothered to give any form of rising scenario in our report yesterday, simply due to the UK index needing above 5,890 at present to simply suggest the rate of descent has eased.

Everything else risks being smoke and mirrors, due to the UK market already triggering serious longer-term drop potentials.

However, we shall suspend disbelief and pretend we're confident further near-term rises shall prove viable.
 
Should the FTSE now continue above 5,460 points, an initial 5,616 becomes the initial calculation.

If exceeded, our secondary works out at 5,799 points. As the chart below highlights, the secondary certainly comes close to interfering with the blue downtrend in the next few days.

As always, there's a fly in the ointment, due to the market already having tripped some pretty major reversal potentials.

Our rule of thumb is basic, when rises occur following a drop trigger, we tend to believe in our primary targets but expect a rise to fade before the secondary.

Only once secondary targets are exceeded does a strong probability present of "bottom" being in.
 
We suspect an attempt is being made to stabilise the markets during this current "house arrest" phase of Covid-19.

To be honest, despite rarely interacting with the outside world, the fact I cannot is already causing frustration.
 
A reverse scenario triggers, should the FTSE wander below 5,160 points as reversal to an initial 5,095 makes sense. Secondary, if broken, works out at 4,977 points.

Source: Trends and Targets      Past performance is not a guide to future performance

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, 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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Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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