FTSE 100: Is this rebound the real deal?

Following market falls not seen since the late 80's, our chartist explains where we're heading next.

FTSE for Friday (FTSE:UKX) 

We really hate sounding like panic merchants. Our commentary last Friday showed 5,260 on the chart, a number we felt worthy of display but we didn't bother explaining the rational in the analysis. So, a drop of 1,467 points in a week saw the market close Thursday at 5,237 points.

This is known as headless chicken territory...

What now, given the UK market closed a session below a major target level?

Rather surprisingly, we suspect some sort of rebound must be on the horizon, if only to allow the market to gather sufficient weight for future reversals.

But we're pretty far from confident any rebound will "stick", given the FTSE 100 is now trading lower than any point since 2012. We should probably abandon our inherent caution, instead adopting similar levels of misery to that adopted by a TV reporter interviewing a doctor.

The big picture now suggests weakness below 5,237 should bring travel down to an initial 4,969 points with secondary, if broken, at 4,368 points.

In fact, secondary could find itself at 3,944, thanks to the market being manipulated downward at the open recently. Visually, there would normally be ample reason to hope for a rebound around the 4,969 point but experience during March (hasn't this been a long month!) constantly warns the only thing to expect is disappointment. 

The market has been forcing the market down quite firmly!

This absurd suggestion comes, thanks to movements made in the opening second of trade. On the days the market was not actively forced downward at the open, reversals experienced were 'only' 60 and 70 points respectively.

On the other two days this week, the market itself forced prices down at the open, creating an environment of panic.

It's certainly quite sobering to reflect on market reversals being caused by the market itself, perhaps taking advantage of an epidemic to maximise on a climate of fear.

Should the FTSE now manage below 3,944 points, we're looking at eventual reversal to a bottom (hopefully) of 3,171 points. If achieved, this will be lower than 2009 and also, the crash of 2003.

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

Near-term, we've a slight suspicion some sort of bounce may occur, so we'll focus on recovery scenario first.

Above 5,311 points is supposed to provoke recovery to a useless 5,345 points.

If exceeded, our secondary calculates up at 5,427 points. And given the pace of descent, we can give a third target level, up at 5,549 points, effectively the level the market stabilised for most of Thursday's session.

If triggered, the tightest stop is at 5,237 points.

Even for near-term reversal potentials, we suggest looking at the Big Picture scenario above. Things are moving fast.

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.