FTSE 100: only really bad news will break the rise

The index has been resilient in January, and our chartist thinks only a catastrophe will change the trend.

FTSE for FRIDAY (FTSE:UKX)

January has, thus far, proven fairly resilient with the FTSE 100, despite plenty of reasons for contrary behaviour. We wonder how much of this can be attributed to a market achieving a series of 'higher highs' and breaking above a pretty firm downtrend?

There generally comes a point in trading when the strength of a trend becomes difficult to resist, creating a scenario where a share price or index will move in a direction which defies logic.

In the case of the FTSE, there are some pretty impressive potentials currently showing. We have little choice but to anticipate the FTSE discovering a reason to move above 6,904 points and, once again, give sufficient reason for a further upswing.

When a market is enjoying an uptrend, it's pretty difficult to define the moment when the trend changes direction unless it's a catastrophe fall, provoked by a major event.

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Our favourite method in this type of guessing game creates a series of contrary calculations. When these outlooks start to be fulfilled, we're generally correct in believing a trend is changing. Unfortunately, this sort of thing will often involve giving trigger levels which shall be perceived as miles away from the immediate market price.

For instance, the FTSE (trading at around 6,790 at time of writing) needs to fall below 6,689 to give the first indication the UK market may be slipping out of its uptrend. Weakness such as this permits reversal to an initial 6,627 points, along with a challenge of the immediate uptrend. Things become sharply dodgy should 6,627 break, as a further reversal cycle toward 6,378 is very possible.

Amazingly, London needs to drop below 5,888 points to utterly confirm the upward break is fake, something visually unlikely. The current strength of the marketplace signals something seriously negative will be required to dissuade the FTSE from its climbing cycle.

The other side of this coin must examine what to anticipate should the FTSE next manage to rise above 6,904 points.

Apparently we should anticipate further market recovery toward an initial 7,049 points. If exceeded, our longer-term secondary (please remember our tenuous grasp of timeframes) calculates at 7,342.

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.