The FTSE 100: an optimistic view
24th September 2021 07:50
by Alistair Strang from Trends and Targets
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His prediction of a dive to 6,830 was spot on. Now, independent analyst Alistair Strang runs the numbers again, and has a surprise for us.
With minimal fanfare, the FTSE 100 actually has done something interesting for the first time in a year. We’ve been moaning about the repeated trend breaks but, unusually, the index broke the ninth uptrend of the year a week ago, created a new tenth uptrend. It then returned above the previous trend. This behaviour generally presages some real market growth.
Goodness knows, the FTSE deserves a break as it has been essentially flatlining since April, using the 7,000 point level as a strange pivot. Hopefully we’re finally witnessing the first early warning for some proper recovery, ideally catching up with European performance. We suspect chasing US growth levels shall prove an ambition too far.
Despite the index currently only 78 points above its 7,000 point pivot, we’re inclined to invest some hope the market has let slip ‘a cunning plan’ for the rest of the year. If we were to rely on conventional trend lines, presently the FTSE needs above 7,380 points to batter its way through the downtrend since 2018, and better 7,550 points to exceed the market high, pre-Covid.
We probably cannot say this often enough but it’s often not the trend which is important but, instead, how the market reacts to a trend. In this immediate instance, generally some optimism is called for despite appearing to weave a lot of cloth from a single thread.
Source: Trends and Targets. Past performance is not a guide to future performance
Our opening paragraphs suggest optimism, quite neatly ignoring the salient detail that Thursday managed to close the day five points below the previous day.
Visually, it’s not the most disturbing signal as the FTSE now needs only exceed 7,131 points to give hope for a near-term charge toward 7,181 points. If bettered, our secondary calculates at a useful 7,271 points. The secondary is especially interesting, visually creating a recent “Higher High” and placing the UK index in a scenario, where longer term oomph to 7,547 calculates as possible, rather neatly matching the market level prior to the Pandemic hit.
For everything to go pear shaped (our garden pears are bitter this year!), the FTSE needs below 7,056 to give potential early warning as this allegedly should trigger reversal down to 7,011 points. If broken, our secondary calculates at 6,932 points.
Have a good weekend, hopefully drier than it is here in Argyll.
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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