FTSE 100: which way will the lacklustre market go?

As the AIM stays strong, our columnist asks what it will take for the main market to restore itself.

FTSE for Friday (FTSE:UKX)

The FTSE 100 is proving less than interesting, and the 20 point trading range experienced during most of Thursday justified spending the day doing chores rather than watching the markets.

The day felt similar to one of those ‘pretend’ sessions, when London is scheduled to close at 12.30pm prior to a holiday and the market grudgingly goes through the motions. It was only with an hour of trade left did the index suddenly discover an ability to rise by a further lacklustre 20 points.

The FTSE exhibits remarkably consistent behaviour. The two charts below highlight a remarkable lack of interesting behaviour, making us experience a mental transition from ‘is today the day’ to ‘what's the point, I'm going to do something else’.

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

This sort of thing becomes a vicious circle, begging the question: are people losing interest in the UK market? The immediate situation has seen many triggering movements across members of the FTSE 100, but the lack of follow through is proving quite dismaying.

In plain English, many shares should be going up yet failing to do so. We take some hope from the UK AIM market, as it continues to outperform the FTSE. Plus, at 1,264 points, it's 300 points above the high achieved before the Covid-19 drop. The FTSE 100, at 6,938 points, is still languishing 560 points below the pre Covid-19 high.

Perhaps naively, we've constantly expected ‘today will be the day’, constantly been let down, and we're losing faith. Of course, the point at which the UK decides to play catch up will invariably occur when the maximum number of folk are looking elsewhere! The immediate situation with the FTSE now suggests the index has to exceed 7,125 points to make proper recovery almost impossible to avoid.

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If we indulge our favourite scenario, a hunt for early signs of strength, above 6,960 points is now supposed to provoke the FTSE to attempt 6,995 points. Given recent conditions, we cannot sniff at the 35-point rise potential, even with the tightest stop looking like 6,900 points.

In the event 6,995 is exceeded, this gives the first hint of strength, especially as our secondary calculates at 7,055 points, placing the index solidly in a zone where an attempt at our big picture trigger level 7,125 can be expected. Visually, there are many suggestions the FTSE is about to experience some weakness and as a result, we're curious as to whether now is the time.

If things intend to go wrong, below 6,903 looks troubling, capable of sparking reversal down to an initial 6,873 points. If broken, our secondary calculates at 6,851 and the prospect of some sort of rebound. The implication should such a level break is the market finding a bottom around 6,785 points.

Have a good weekend!

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.