Interactive Investor

FTSE for Friday: hopeful of a proper bounce

After losing over 100 points this week, independent analyst Alistair Strang believes the FTSE 100 index could be ready to deliver some gains. Will it comply?

24th May 2024 07:40

by Alistair Strang from Trends and Targets

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As we trudge through the rain to the final week of May,  the market has echoed the mood of the weather but we’re a little hopeful things shall again improve. After all, here in Argyll, Scotland, summer generally happens during May and June, so perhaps the FTSE 100 shall choose to replicate our mood.  

One interesting aspect of the reversals the most recent four days achieved is that the market low of 8,332 points was pretty much an exact journey to a bottom, a point from which we’d hope for a proper bounce.

Strange to note, last Friday we’d given an initial drop target at 8,384 with secondary, if broken, at 8,368 points. To keep everyone amused, on Tuesday the index reversed to 8,384 points, then supplied a 40-point bounce.

But before the bounce, the index briefly broke below our target level in a movement which, from our perspective, meant any bounce shouldn’t be trusted. The next day, Wednesday, saw the market venture down to our secondary target at the open of trade and chose to break below for a few minutes. But once again, it bounced, this time by 30 points.

So once again, we were justified in distrusting what was coming, and Thursday didn’t disappoint. Had we been writing publicly about our expectations, folk would have seen the private note to our customers: “shall not be surprised if the FTSE experiences reversals to 8,330 before kicking off a bounce”.

Now, as we approach Friday with the market not making it below 8,330 points, we’ve some hope for a day with some market gains!

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

In the hopeful scenario of our theory being correct, above 8,365 points is supposed to kick things off, giving an initial utterly useless target of 8,375 points. Our secondary is quite a bit more useful at what we describe as a “longer-term” 8,408 points.

We’ve opted to sneak in this caveat following the results from last Friday which, as shown above, took five trading days to come to fruition.

In normal circumstances without the background noise of world events and news of a coming UK election, conventionally we’d be giving 8,408 as an initial target with secondary, if beaten, at 8,467 points, but recently the FTSE 100 has been quite stingy with the width of movements.

Should the market discover a reason for things to go pear-shaped, now below 8,330 looks a bit troubling, threatening reversals to an initial 8,285 points with secondary, if broken, at 8,225 points.

Have a good weekend.

ukx240524b.jpg

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. 

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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