FTSE 100: time for real recovery?

The index might be about to challenge its pre-Covid highs, our columnist believes.

FTSE for Friday (FTSE:UKX)

A week ago, we commented that the FTSE 100 was perhaps on the cusp of a revolution. Indeed, it has spent the last week behaving in a revolting manner.

Our suspicion was the UK may opt to follow the French model, i.e. essentially mess around for a couple of weeks then break north to challenge the highs achieved pre-Covid. It now looks like the FTSE only needed a week chasing its tail, as there's some pretty firm suggestions the UK market should experience some real recovery.

For the UK, the market level pre-Covid was 7,500 points, and it's presently around 6,980 points. Our suggestion therefore is to anticipate growth of just above 7% in the week again.

Then, if the French scenario proves a valid role model, to anticipate some hesitation for a week or so. But, as is always appears the case with the FTSE, there's a fairly major spanner in the ointment.

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Currently, from a big picture perspective, we calculate movement above 7,000 points should justify market growth toward 7,264 points.

If exceeded, our longer-term secondary works out at 8,069 points. Noticeably absent from our calculations is any reason to expect hesitation at the 7,500 level, as the big picture suggests the market should simply keep going, should our initial 7,264 be exceeded.

Curiously, something similar was possible with the French CAC40 index, a curiosity the market opted to deal with on 11 March by simply gapping the CAC40 up above the critical 6,000 point level before trading commenced.

It's certainly going to prove interesting watching FTSE behaviour in the weeks ahead.

Near-term movement exceeding 7,000 points should attempt an initial 7,021 points with secondary, if exceeded, a rather more useful 7,059 points. Amazingly, such has been market strength that we can present a third target level, with 7,123 points as a viable ambition.

For everything to go wrong the index needs to slip below 6,950 points as this calculates with a drop potential to an initial 6,940 with secondary, if broken, at 6,920 points. In reality, the FTSE needs to slip below 6,800 before we'd be forced to regard reversals as serious.

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.