How confident can you be that the FTSE 100 will rally?

The City index remains hugely volatile, so our chartist tweaks his forecasts. 

FTSE for Thursday (FTSE:UKX) 

During the last crash, we'd naively written for trading in banking shares to be suspended until such time the markets stabilised in the years ahead.

This enlightened attitude may have been something to do with a quarter of a million shares in RBS (LSE:RBS) and watching life savings going on a prolonged holiday!

The "funny" thing, when RBS hit 9.8p in March 2009, rather a few folk pounced, doubtless believing the 10p level was certain to provide a reasonable bounce.

This supposition proved correct. Until now! With RBS hitting 125p on the 18th March (let's be honest, it's really 12.5p) we're not entirely confident of a bounce appearing.

We remain trapped in the bank, thankfully our overall shareholding now reduced to less eye-watering, loss making, levels.

As for the stock market, the day to close the markets was 6th March. On that day, the FTSE 100 closed below the uptrend since 2009, achieving a lower low. To us, this was a bad thing.

But crucially, closure could not be justified unless one was pretty confident in what was coming next, the good old "time machine" scenario.

Needless to say, we had a report published on the 6th, one which has proven rather concise in the two weeks since.

• FTSE 100: Where the real danger lies

Unfortunately, despite being proven correct in our reversal scenario, we're uncomfortable with any "shut the markets" philosophy unless it's introduced with precise criteria to justify re-opening.

In addition, a policy of market closures would need equal safeguards for sudden, unprecedented, rises in the markets.

For instance, what if a cure for Covid-19 were announced, something cheap which could simply be added to drinking water. Or preferably whisky!

The next day, the markets would move faster than someone with a dodgy immune system, hearing a distant cough...

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

As for the FTSE 100 near-term, some very slight hope feels possible, the FTSE 'only' needing to exceed 5,181 to enter a cycle to an initially 5,245 points with secondary, if exceeded, calculating at 5,323 points.  

We're less than confident with this scenario, thanks to the minute by minute chart below. As shown, since 6th March, the UK index has adhered to a fairly firm pace of reversal below Blue.

Only with a fairly solid chunk of movement above this trend will we dare raise an eyebrow.

Should the more recent pattern of misery repeat, now below 5,006 points looks very capable of reversal to 4,863 with secondary, when broken, at 4,780 points.

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.