Zak Mir’s midweek missive – FTSE 100 & The Triple Top

Once a year, for over ten years, I have been a guest speaker at an event called Master Investor held in London in April. I am forced to take the longer view for my presentation at this show as far as stocks and markets are concerned. Being cynical about it (as ever!), over a year, most calls can be proved wrong or right, although I am still waiting for the Euro to die in 2013 after the predictions for this to happen by the end of 2010, 2011 and of course last year…But of course, the set piece call at Master Investor for any technical analyst worth their salt is where the FTSE 100 may be heading.

Today I include the FTSE 100 monthly chart which appeared in my Master Investor 2009 presentation special. Point number one is that I was counting on the main red 1987 uptrend line holding at 3,900, which thankfully it did. The second point is that I was going for a journey towards 7,000, the obvious thing to happen given the peaks towards this zone in the 1990s and 2000s. However, the third point may be the big one: that after peaking towards 7,000 there could be a return towards the late 1980s support line – as a triple top. We shall see – there is more on this chart in my book 101 Charts For Trading Success.

FTSE 100 outlook

For a somewhat less Mystic Meg (for those of you who remember this particular soothsayer of the 80’s!) approach to the FTSE 100, it is worth highlighting that on the daily chart we have a 6 week old bull flag from late January, with the flag around 200 points wide. It currently rests upon the 600 point move up from mid November and the flag looks to be a mid move consolidation to me which promises us another 600 points to the upside should we see 2 consecutive weekly closes above the flag at 6,400.

A secondary buy signal would come from the RSI oscillator window and the break of the red January line at RSI 60 – what would actually be a leading indicator on a new leg higher, perhaps as soon as later this week. Overall, it should be remembered that  perhaps the best thing though about mid move consolidations such as the one that the UK index is currently experiencing is that should the formation be broken to the downside you can cancel the upside scenario with minimal damage in terms of the relatively narrow width of the recent 6,200 – 6,400 range.

S&P 500 outlook

For the U.S. indices, we really are in a different place, with the financial headlines being all about the proximity / break of all time highs from the pre financial crisis period of 2007. In the case of the S&P 500, it can be seen that even as a minimum here one would be calling this market towards the September resistance line heading as high as 1,535 and we are effectively there at the time of writing. This may not sound like much, but given the way that even where we are currently, the index has a relatively modest 59 RSI, a break of 1,535 could  easily lead to a substantial leg higher. The favoured destination as suggested by the 2012 resistance line projection is towards 1,600 plus over the next 1-2 months. Only back below the 50 day moving average now at 1,485 would even begin to change the ultra bullish looking picture.

Dow Jones Index outlook

For the Dow, we have an echo of the present position in the S&P as you might expect, with the equivalent of 1,535 and the September resistance line zone being 14,150 on the Down. The big question for the rest of this week is whether we shall be treated to a break of this key level on an end of day close basis. It is key because below it the Dow and the S&P could theoretically still be in a bearish rising wedge pattern. Through 14,150 would point to the top of the red rising trend channel drawn on the daily chart of the Dow towards 14,500 plus over the next 4-6 weeks.