Interactive Investor

FTSE for Friday: four reasons to be optimistic about the FTSE 100

29th July 2022 07:30

Alistair Strang from Trends and Targets

With holiday season in full swing, financial markets might normally lack direction, but independent analyst Alistair Strang is optimistic this summer as chart movements tick all the boxes on his checklist.

August is normally a “pretend” month. Writers pretend to be working, the markets pretend to be trading, share prices pretend to be moving. But in reality, due to the movers and shakers all being at Butlins for the holiday month, very little actually happens. 

However, this time around, we’re a little impressed with some recent movements on the FTSE 100. While optimism based on the last few sessions of a months trading can often be trashed in the first couple of days of a new month, it’s worth considering a few recent market nudges in the right direction.

Firstly, the FTSE has managed to break through the downtrend since the start of June. This ticks a box.

Secondly, the FTSE has managed to close above the prior highs of this downtrend. This ticks a happier box.

Thirdly, the visuals don’t entirely stink and the FTSE needs to slump below 7,300 points to spoil our optimism.

Fourth, a bit contentious, is our calculation that the FTSE now intends head to 7,700 points. By exceeding the downtrend since 2018, in this scenario, the index will also find itself trading above any previous levels of 2022, implying happy days are ahead. This potential ticks yet another major box.

Adding everything together, the indications currently suggest August should prove interesting for the FTSE.

Past performance is not a guide to future performance.

From a nearer term perspective, things still manage to suggest optimism as above 7,397 now calculates with the potential of gains to an initial 7,426 points. If exceeded, our secondary ambition works out at a pretty amazing 7,513 points.

Beware the danger (again) of a self serving opening second spike upward at the market open, due to the risk of this being used to slow everything down. Thursday produced such behaviour and unfortunately, the futures markets ran ahead after hours, topping out at 7,418 despite the FTSE ending the day at 7,345 points.

Hopefully, FTSE futures relaxation will allow the FTSE on Friday to open very near to 7,345 points, ideally allowing a day of some quite reasonable upward movement.
 
If everything intends to go wrong (near term), below ,7308 points allows weakness to an initial 7,283 with secondary, if broken, at 7,246 and hopefully a solid rebound.

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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