Stay Calm And Break Out? London Financial Times Index On The Verge

If you initiated positions in the London Financial Times Index back in the year 2000, you would now be back to even. This index, representing the 100 largest publicly traded companies in the United Kingdom, just reached 6898.13, its highest close since 1999 (6950.60). That’s 15 years ago if you need to do the maths like me! After a decade and a half, and two steep price corrections, the FTSE is at par. Some investors might call the past 15 years exhausting. Others might call it consolidation. If the latter, then we may be on the verge of an opportunity. From a big picture perspective, you can see the magnitude of this price action in the first chart below, which holds the monthly price candlesticks from 1990 through today.

FTSE Monthly 15 years

When we zoom in to the weekly chart (see below), we find that the British index has been battling the 6800-6890 level for about 2 years. This level is overhead resistance – where sellers show up and cause the price to stagnate, retrace, and find demand. As a reminder, price is the work of supply and demand. More supply than demand, price goes down. More demand than supply, price goes up. For nearly 24 months, the 6800-6890 level has provided plenty of supply.

FTSE Weekly Supply and Demand

Digging deeper into the index on the daily chart (see below), the significance of this level can be clearly seen. We are on the tenth attempt to break this level. The more times price attempts to break through resistance, the weaker that area of supply becomes. Today, we may have witnessed the breakthrough. If that’s the case, the opportunity ramifications are large. The longer the base (2 years -or- 15 years!), the higher the space. If this breakout holds and does not prove to be a false breakout (closing below 6800), then the initial price target is 7700, 12% above current levels. The risk is well defined as we don’t want any exposure below 6800. A risk of 1% for a gain of 12%. Not bad.

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FTSE Daily Breakout?