FTSE 100: Watch carefully for an 'illogical upward surge'

Our chartist shares his forecast for gold and makes sense of an oddball week for the FTSE 100 index.

We started the week warning of the dangers if gold bettered 1,357 dollars. It did, rapidly achieving our initial target of 1,385.

In fact, using our argument which favours watching the initial surge, at 2am the price shot above 1,385 for a few moments, hitting 1,394 before rapidly falling back to the 1,385 level. This proved we were watching the correct trend, signalling movement next above 1,394 remains with the ambition of 1,401 next. If bettered, our secondary calculation is now at 1,416 dollars.

The FTSE 100 index has experienced another oddball week, going into Friday roughly 75 points higher than it started the week. Compare this with the 4x larger Dow Jones and its 600-point volatility. Or the 1.6x larger German DAX and its near 300-point range.

The FTSE is failing to impress with any real strength, constantly underperforming compared with other markets. Perhaps it’s a symptom of the UK’s fragility, effectively leaderless and about to step into a new trading environment.

Talking to folk who trade the markets, there is a broad expectation of severe trouble coming to the FTSE. If this is indeed the case, it shall prove worth watching for an illogical upward surge taking place first as the market rarely gives free gifts.

We’d be very suspicious if any FTSE movement above 7,650 was capable of sticking. Quite the converse as a drop should follow.

Near term, below 7,425 looks capable of an initial 7,399 points. If broken, our secondary calculates at 7,365 pints and hopefully some sort of bounce. There are longer term implications of any break of 7,365 as the market would be viewed as entering a cycle down to 7,247 points. The tightest stop looks like 7,461 points.

Above 7,461 should prove capable of an initial 7,493 points. If bettered, secondary is at 7,527 points. Stop can be 7,425.

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.