How FTSE 100 can hit 10,000

FTSE big Picture

Sometimes it's worthwhile to step back and view the bigger picture. The FTSE 100 is actually experiencing one of these moments currently, if only due to a broad expectation the index shall experience some reversals in the next few months.

However, there are ample arguments favouring an uppercase HOWEVER.

If the FTSE were a share, we'd be pretty comfortable it's now on a cycle toward 8,360 points. Better still, should the index close above such a level, we calculate 10,006 as the next port of call.

Quite often we mention "Glass Ceilings" on shares, always accompanying such reports with a degree of confidence for the future once a share price actually closes above a Glass Ceiling. 

In the case of the FTSE, it had one at roughly 6,800 points and we've painted a green dotted line which illustrates how important it was to prove. Once the index closed above this level, it entered a growth cycle, rather amazingly achieving something surprising in the period since. 

In March, the UK index reversed down to the 6,800 level and to use a "charty" cliche, it back-tested the glass ceiling. 

For the market to adhere to our "share price rules", the next signal required was for the index to climb higher than previously. This has now taken place and, as a result, optimism is justified. 

We can now mention 10,000 points without giggling, other than to cough politely and suggest the index needs below 'red' on the chart, currently 6,150, to drop out of the growth cycle. 

The funny thing is, even a 10% correction on the market would just challenge the uptrend since the Brexit vote, but not place the long-term growth cycle in jeopardy.

In summary, even if politicians achieve their aim of damaging confidence, it appears likely the greater damage has been of confidence in politicians as the market appears to be ignoring them! 

It's hopefully pretty obvious, but should the UK market better 7,900 again, a short position may not be the wisest idea!

Source: interactive investor      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, Shareprice, or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea.