FTSE 100: why is it missing out on the party?

The index has not only lagged pre-Covid-19 levels, it also trails behind its overseas rivals.

22nd January 2021 08:28

by Alistair Strang from Trends and Targets

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The index has not only lagged pre-Covid-19 levels, it also trails behind its overseas rivals.

FTSE for FRIDAY (FTSE:UKX)

We could start by saying the FTSE 100 is heading toward 8,726 points, a world-beating ambition placing the UK market in the same playground as Germany, Japan, and the USA.

Unfortunately, just because we can calculate such a potential does not mean we shouldn't adhere to the reality of the situation. Unlike many other markets, the UK has failed to better its pre-Covid-19 levels, in fact not even coming close.

Real world Britain is performing quite dreadfully in every area which matters, perhaps aside from levels of government propaganda.

To convince us the FTSE intends some proper recovery, the market needs to trade above 7,290 currently. Given the index performance so far this year we're unable to see indications the UK intends to head to this trigger level any time soon.

Quite the opposite, if we're honest, as most trading days in 2021 are showing slow and painful declines in the FTSE 100, while other countries are having a party to which the UK isn't invited.

Could it be the case that the FTSE’s sober approach to market gains may prove the route of wisdom, with other countries suddenly experiencing unexpected declines? In some ways, this isn't as silly a suggestion as it first appeared, if only due to Wall St calculating with a good reason for hesitation around 31,200 points, the current level.

Near term, FTSE traffic below 6,688 looks like an issue, capable of triggering reversals to an initial 6,635 points. If broken, our secondary for the longer term (or later in the session!) works out at 6,564 points. The tightest stop, if triggered, is at 6,730 points.

The other side of the coin demands the index move above 6,763, a tripwire allegedly capable of provoking movement toward an initial 6,792 points. If exceeded, our secondary calculation comes in at 6,835 points and yet another challenge of the blue downtrend on the chart.

Have a good weekend!

FTSE chart 21.1.2021

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. 

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