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We'll soon be moving from Recovery to Growth Mode

APPARENTLY, red-haired people are in for a hard time and their gene will die out, our postal service is going to collapse, pensioners will be left pensionless, foreign invaders will assault our undefended shores, stock market shares in Scottish companies will collapse, and the pound in our pocket will grow little sterling legs and run south of the Border - or so I've heard.

But my job is essentially to follow money patterns and figure out what's coming next, preferably with a measure of accuracy. Thankfully, I've been able to write some software to map existing trading systems with a substantial degree of success in predicting the future.

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For a glance at Scottish companies traded in London, I've taken a fairly hard look at AG Barr, Standard Life, FirstGroup and the two villains of the piece, Lloyds and RBS.

Something to get out of the way up front is I'm not seeing any imminent signs of share price reversal in any of these companies. Quite the reverse is true.

During 2014 I've been noticing early signals of coming growth with a degree of substance against many companies, and this small bag of Scottish listings illustrates similar signals to those throughout the rest of the UK. Fairly crucially, despite constant political pronouncements about the UK economy growing faster than a speeding cliche, from my perspective it isn't. All it is doing is recovering from the misery of early 2009.

My calculations have even produced a number for the FTSE which is the critical level the stock market must pass to move from Recovery Mode into Growth Mode. This fabulous invention is at 6937 points.

It may seem a rather arbitrary concept but it's something I use against shares, simply because a different set of calculations is required when a share price starts to go up and transits from simply trying to get as high as the level it was at once before. Barring world events, 6937 will prove a crucial watershed for the market place.

Firstly, A G Barr the purveyors of our other national drink: currently I'm able to calculate this as heading to 820p. Once the share price closes above 672p, acceleration should improve nicely. Rather ­amazingly, it has a super long-term track target of 1377p and the price would need close below 578p to rubbish this potential.

Next, I'm often asked about Standard Life and they're also looking fairly promising for the future. Their share price is viewed as weakening slightly down to 325p but as part of an upward path to 460p, maybe even another all-time high of 575p. ­Standard Life would need a dramatic move below 223p to cancel its longer growth potentials.

FirstGroup has managed to infuriate investors over the last five years but we're now waiting with baited breath for it to enter Recovery Mode. Currently trading in the high 120s, it need only close above 133p to enter a mode signalling growth starting towards an initial 150p but realistically, it will be worth waiting for a longer term visit to 199p.

If the markets are telling me lies, the price would need to slip below 104p to cancel the upward cycle.

Royal Bank of Scotland has been doing something surprising. I've been waiting for the price to head to 327p for a month or so and instead, it has resolutely refused to go down and instead, seems intent on trying to prove me wrong. Currently trading around the 360p level, in the event of it actually closing above 386p, I'm tending to expect continued growth to 503p, and 562p longer term.

For RBS to justify a dose of panic, the price would need to close a day below 252p, as this would be viewed as a precursor of coming reversal to 145p.

Lloyds completes my small Scottish share parcel and this one perhaps worries me most of all. The share is probably going to go up and next time Lloyds manages to close above 87p, hanging on for a longer term 135p will make a lot of sense. Currently trading in the higher 70s, Lloyds would need actually need to close below 59p before I'd dare feel it all going wrong and the price was heading to the 40s.

Now on the currency question, I recently ran a scenario on what would happen if sterling lost 10 per cent of its value. The thinking was simple; if Scotland has 40 per cent of the UK's land mass, along with 10 per cent of the GDP, 10 per cent of the tax revenue, 30 per cent of the red hair, 15 per cent of drink exports etc, a pound which is not backed up by Scotland's asset base is liable to face some readjustment against other major currencies.

The resultant numbers place sterling on a path to 1:1 parity with the euro and US dollar - and also the Australian dollar.

So it seems that should our country vote Yes, ­Scotland must continue to support the UK pound and agree to be part of a ­sterling alliance. If it fails to do so, the future for the pound south of the Border is not great.

I accept this is perhaps a rather different view of the future to the one the politicians would prefer, but on those numbers, it seems a holiday in Europe or the US will be out of the question for folks south of the Border - but for tourists visiting London, currency exchange will be a doddle.

Alistair Strang is founder of Trends and Targets

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