FTSE 100: can the City index recover to this analyst’s level?
The market is in very dangerous territory. Our chartist looks for viable recovery levels.
30th October 2020 09:36
by Alistair Strang from Trends and Targets
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The market is in very dangerous territory. Our chartist looks for viable recovery levels.
FTSE for Friday (FTSE:UKX)
In Argyll, Scotland, we take some absurd numbers for granted at this time of year. Things like five to 10cm of rain in a day, or winds of 70mph, become normal.
Not for us the picturesque autumn ideal of leaves gently shimmering to the ground.
Instead, leaves are waterlogged, blasted horizontally at speed and clog drains. The funny thing, if the number 70 is mentioned anywhere else, is that it refers to Fahrenheit!
Equally, five to 10cm would be a socially acceptable snowfall. At time of writing, our gentle garden stream has become a raging torrent, its outflow into the sea probably visible by satellite.
This fascination with numbers actually was inspired by last Friday's FTSE 100 outlook. Numbers are important, even when perceived as something different. As can be guessed, autumn is most certainly not our favourite season, here in our part of Scotland.
Our criteria against the UK market projected 5,620 points, a target achieved on Wednesday morning (proving, again, our grasp of timeframes stinks). Unfortunately, the predicted bounce was by only 30 points.
The last 48 hours have seen our 5,620 level effectively behave as a glass ceiling, with the index bouncing up and down against this level.
The high of the day on Thursday at 5617 points was almost an insult, the market teasing us that we'd obviously identified a short-term pivot level.
The FTSE closed Thursday at 5,581 points. By any standards the market is in very dangerous territory.
Weakness next below 5,525 points now calculates with the potential of reversal to an initial 5,265 points.
If broken, secondary works out down at an absurd-sounding 5,095 and hopefully a proper bounce.
Unfortunately, in this numeric limbo dance, this secondary could easily extend to the 4,999 point level, a point where the visuals (thanks to the March Covid-19 drop) indicate some sort of glass floor awaits.
Perhaps we're falling victim to the usual assumptions of the end of a month causing problems. Or a global pandemic causing problems. Or the US election causing problems. Or Halloween causing problems.
Regardless, it's easy to fall into the mindset of expecting the worst. We shall be interested if the FTSE recovers above 5,630 points next.
Such a movement is supposed to trigger market recovery to an initial 5,697 points with secondary, if exceeded, at 5,804 points.
Neither number inspires much confidence, the UK index needing to move above 5,880 points to suggest movements since last Friday have been a bad dream.
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.
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