Yesterday proved pretty chaotic with the index dropping again. Our chartist looks at the key scenarios.
For the FTSE 100, Monday proved pretty chaotic. The index was (as usual) forced down at the open, hitting 4,940 within the first four minutes.
Unusually, some surprise recovery was enacted, and by noon, the market ignited the rockets. Needless to say, it all fell apart after 30 minutes with the day ending nearly 4% down.
The wild swings are proving frustrating, giving sensible Stop Loss Levels for various index scenario now an almost impossible task. As fairly simple "for instance" comes with the current market position.
There's a heck of an argument favouring reversal to around 4,000 points next. At time of writing (Monday night), the FTSE is trading at 4,993 points, so we're postulating nearly 1,000 points of drop.
But the trend line (blue) which delineates the current drop cycle is presently at 5,995 points.
This suggests a nearly (and impossible) 1,000-point width of stop loss.
It's almost as if the market knows this. Gone are the days of a 1% day being fairly vibrant for the FTSE. Instead, we are starting to regard 4% and 5% days as the norm!
Near-term, it feels like weakness below yesterday's 4,922 risks reversal down to 4,792 points.
If broken, secondary calculates down at 4,726 points. The tightest stop works out at 5,110 points.
It's going to be worth remembering, this scenario risks taking the FTSE below the critical 4,900 level.
Please, do remember we are speculating on the FTSE during trading hours, not before - or after - hours futures.
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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