FTSE for Friday: what next after FTSE 100 breaks this cycle?
Rangebound since late May, the UK's blue-chip index just broke a cycle. Independent analyst Alistair Strang explains what it might mean for the FTSE 100.
26th July 2024 07:39
by Alistair Strang from Trends and Targets
A lot can happen in a week. Unless it’s to do with the FTSE 100, as last week we discussed the ridiculous Sine Wave which the market has been describing since June of this year.
Until Thursday, the FTSE doddled along, but everything may have changed yesterday as the FTSE broken the sin of the Sine cycle. Unfortunately it was with movement within the opening 90 minutes of trade, so we really distrust the drop as it all felt very manufactured and artificial.
- Invest with ii: Open a Stocks & Shares ISA | ISA Investment Ideas | Transfer a Stocks & Shares ISA
Essentially, we suspect the plunge at the open on Thursday shall prove to be a “fake”, a movement designed to commit traders to short positions as there was no doubt the market had broken trend. However, by Thursday afternoon, the market changed direction, climbing remorselessly from 8,057 points to close the day at 8,185 , a very unusual 128-point gain.
Should this positive flow of energy continue, we shall not be surprised if movement above the Green 8,200 point median of the imaginary Sine Wave triggers recovery. We can calculate an initial 8,224 with our secondary, if bettered, working out at 8,280 points. If triggered, the tightest stop is fairly wide at 8,120, though we suspect 8,150 shall probably suffice.
As always, there’s a fly in the ointment and it comes from how Futures prices are currently trading. Despite the FTSE 100 closing the session at 8,185 points, Futures are sprinkling pixy dust everywhere, running at 8,222 at time of writing. In the very likely event the market is spiked upward to our initial target level of 8,224, we would expect some relaxation toward the 8,200 level within the first hour before a surprise climb sets in.
Or so we hope. Of course, beware if the FTSE is actually “gapped” up to our target level at the open as this will make reversal less likely.
So many numbers, so little time…
As usual, we can present a converse scenario and it kicks in, should the index make it below 8,150 points. Movement such as this risks promoting reversal to an initial 8,121 with our secondary, if broken, at 8,084 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.
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.