UK FTSE 100 (.FTSE) hits its 35th birthday

UK FTSE 100 (.FTSE) hits its 35th birthday

UK FTSE 100 (.FTSE) hits its 35th birthday

It was in 1984 that T-shirts proclaimed ‘Frankie says relax’ and the song that inspired this sartorial trend (by Frankie Goes To Hollywood) reached the top of the pop charts.

It was also the year when the FTSE 100 index of Britain’s biggest publicly listed companies was launched.

Now almost 35 years on, we would be hard pushed to find many bands that are chart-toppers today. But the FTSE 100 boasts a surprisingly large band of survivors and thrivers.

Someone who cannily invested £100 in each of the 30 companies that are still listed on the stock market – either under the same name, new name, or in another index – would have seen their original £3,000 transform into a staggering £168,413. 

What a lesson in the power of the stock market to make you rich!

The FTSE stands for the Financial Times (and) Stock Exchange, the two companies that originally created the index. 

Nicknamed Footsie, it is made up of the UK’s biggest companies ranked by market capitalisation. This is a company’s value calculated by multiplying the total number of shares by the current share price. 

The minimum market ‘capitalisation’ to qualify for inclusion in the index 35 years ago was £100million. Today, it is more than £4billion.

At launch, the index was valued at 1,000. It peaked in May this year at 7,778.79, but Brexit nervousness has seen it slip, closing last Friday at 6,721.17. 

The index is vital because almost nearly everyone in the country will have a financial interest in the companies that comprise it – through their pension, Individual Savings Account or share portfolio.

The index has endured several rocky periods – from Black Monday 1987, Britain crashing out of the European Exchange Rate Mechanism in 1992, the financial crisis of 2008, through to the 2016 Brexit vote. 

In recent months, it has also faltered as a result of continued Brexit uncertainty and fears over the health of the world economy.

Today the index is roughly back where it stood at the turn of the millennium when the dotcom boom was raging – and before the bubble burst spectacularly in March 2000. 

The Footsie is, in effect, a weather vane for business, responding to political, economic and global events. But on closer inspection it is not a good measure of the long- term investment gains earned by investors.

Looking at the rise in the index as a whole, it would appear an average investment would have risen by only 6.8 times in 35 years – turning £100 into £670. 

This exposes the Footsie’s essential weakness – that it ignores all-important income. 

Anyone worried about the FTSE’s recent bumpy performance as it responds to Brexit nerves should remember that it is the compounding of dividend income over time that is all-important.

That same £100 invested 35 years ago in the FTSE 100 Index would be worth more than £1,700 if dividend income had been reinvested.

To put this figure into some kind of perspective, data scrutineer Moneyfacts calculates that had you left £100 in the average easy access savings account over the same period it would now be worth £340.

This helps to reduce the impact of any downturn at home on the stock market. About 70 per cent of the earnings from the 100 biggest companies are now generated outside the UK.

The survivors

Of the 100 companies comprising the index on launch day – January 3, 1984 – 30 are still listed on the stock market, give or take a name tweak or slippage into the lower rankings of the FTSE 250. 

Though some of these survivors have dropped out of the index and then rejoined at a later date, a select few have remained from day one, such as British Petroleum (BP).

The remainder of the founding club have either been broken up as a result of corporate activity, swallowed up or merged with another firm (for example, Cadbury was bought by US food conglomerate Kraft).

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

By the way, prices are vulnerable to a correction towards 7,093.05.

The projected upper bound is: 6,899.19.

The projected lower bound is: 6,532.16.

The projected closing price is: 6,715.68.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 22 white candles and 28 black candles for a net of 6 black candles.

A long lower shadow occurred. This is typically a bullish signal (particularly when it occurs near a low price level, at a support level, or when the security is oversold).

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 32.4933. This is not an overbought or oversold reading. The last signal was a buy 1 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 38.96. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 39 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -97. This is not a topping or bottoming area. The last signal was a buy 2 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 11 period(s) ago.

Rex Takasugi – TD Profile

FTSE 100 INDEX closed up 9.240 at 6,721.170. Volume was 102% above average (neutral) and Bollinger Bands were 26% wider than normal.

Open High Low Close Volume___
6,711.9306,733.0006,653.6506,721.1701,645,487,232

Technical Outlook
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish

Moving Averages: 10-period 50-period 200-period
Close: 6,780.52 6,970.14 7,357.81
Volatility: 16 17 15
Volume: 931,653,312 860,756,096 828,838,528

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FTSE 100 INDEX is currently 8.7% below its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of .FTSE at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on .FTSE and have had this outlook for the last 11 periods.

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