Interactive Investor

FTSE 100: can the index finish the day on this level?

Yesterday the index turned positive. Our chartist sees if it will end the week on a high.

23rd October 2020 10:02

Alistair Strang from Trends and Targets

Yesterday the index turned positive. Our chartist sees if it will end the week on a high.

FTSE for Friday & FTSE too! (FTSE:UKX) 

It's worth zooming out and remembering the big picture when reviewing something. 

The UK market has a couple of especially interesting items of note, not least being the blue ruling downtrend. 

When we extrapolate this particular trend since 20th January, the chart indicates the market needs to exceed 5,975 presently to give the first solid indication the Covid-19 panic is perhaps over.

Visually, the market does need to require a great deal of work to escape this mess. But we're a little concerned due to a movement which happened in the last day, one which felt fairly threatening. 

With the FTSE 100 hitting 5,716 on Thursday, the index broke below a fairly established glass floor of 5,771 points. 

Despite the market recovering, we're inclined to treat this as a warning sign and suspect any further weakness below 5,771 points risks a reversal cycle starting toward 5,280 points. 

In itself, this is fairly alarming but the largest reason for outright panic comes, should 5,280 break.

A calamity such as this risks opening the floodgates for further reversals with a bottom, hopefully, now calculating at 3,922 points. 

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

Almost amusingly, such a bottom target tends to match the uptrend drawn from the tech crash of 2003 through the banking crash of 2009. 

Should such a number appear we'd certainly hope for some sort of rebound, as the implications below such a level dare not yet be examined due to the need to use words like 'headless’ and ‘chicken'.

As for our extremely popular FTSE for Friday, we suspect the opening gambit on Thursday with a plunge to 5,716 shall prove to be a 'fake', one of these market manoeuvres designed to trigger a load of short positions only to have stop loss levels met later in the day. 

We'll be fairly convinced of this should the UK index exceed 5,820 points, as this looks like triggering recovery toward an initial 5,865 points with our longer-term secondary (or later that day!) calculating at 5,916 points. 

If triggered, the very tightest stop is at 5,757 points, but visually we prefer 5,745 points.

The alternate scenario comes, should the index wander below 5,745 points as it risks reversal to an initial 5,692 with secondary, if broken, down at 5,620 and hopefully some sort of bounce.

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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