Interactive Investor

FTSE for Friday: reasons to remain optimistic

14th January 2022 07:45

Alistair Strang from Trends and Targets

Despite a wobble on Wall Street and weakness in the tech space, there is room for optimism where the FTSE 100 is concerned, argues independent analyst Alistair Strang.

With the FTSE 100 now trading above the pre-pandemic level on 7,550, we’re hopeful the UK follows the rest of the world in copying what happened next. For instance, France & Germany enjoy markets which have grown 20% since exceeding their respective highs, Wall Street also painting a 20% gain, while the S&P and Nasdaq vary between 33 and 50% growth.

Obviously, the world doesn’t lack pundits who’ve been complaining the growth rates are unsustainable, making us wonder how many years something needs to stay positive before they admit their attitude was incorrect!

For the UK to follow the French and German models, we should now be planning for a period of growth on the FTSE, perhaps to around the 9,000 point level. Certainly, when we balance such optimism against current headlines (Prince Andrew, Boris, worst Covid death rate, China spies, more Boris, someone leaving East Enders, etc), it becomes difficult to pretend confidence for the future.

However, other countries appear to be flourishing, despite their own infestation of domestic drama. Perhaps we are finally witnessing a proper separation between the entertainment sector (politics) and the business sector. Certainly, the US managed to perform quite nicely, perhaps despite Mr Trump.

However, we do intend stick to our rhetoric and anticipate some proper FTSE 100 hesitation around the 8,100 point level, despite how the rest of the world performed once each country exceeded their pre-pandemic high during the last 18 months.

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

Near term, above 7,568 points calculates with the potential of ongoing recovery to an initial 7,613 points. If bettered, we can suggest a secondary at 7,636 points as a viable ambition.

To be honest, we must regard the current cycle as pointing toward 7,730 points, hopefully appearing within living memory. Despite this first complete week of the year as producing positive movements, the FTSE certainly hasn’t been flamboyant with outlandish daily rises. The index needs below 7,422 to spoil the immediate party.

For a real issue to enter the frame, the UK index needs now to retreat below Blue on the chart, this being a downtrend which dates back to the start of 2020.

Visually, there can be little doubt the market regards this line as important and, currently, the FTSE needs below 7,373 to suggest some blunt force trauma threatens. Such a triggering sensation risks promoting sharp reversal to an initial 7,279 with secondary, if broken, at 7,173 and hopefully a bounce.

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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