The start of this week saw the markets pullback but only to see a trend continuation to the upside. Instead of having a standard corrective move the stock indices saw a shallow move which then led to a sharp move by the third trading day and is now looking set to reach the upside objectives. Going into next week it appears that we may just reach the price targets which could then see another pullback. What is important to focus on is that the trend remains bullish but a worrying aspect is that on some technical indicators a bearish divergence is starting to emerge. See key levels below:
FTSE 100 reaching for 6150
The FTSE 100 is now just a few points shy of reaching the 6150 target. Once cleared the index could then set sights on reaching for 6200 – 6250 but it is within this zone that the index could see a challenge whereby a corrective move may transpire. Because the trend is bullish as per momentum basis the market could instead form a consolidation rather than a correction. Also the index has found good support at the 5900 level and this should stand firm over the coming weeks. The alternative scenario is if 5900 is broken then a correction is more than likely at hand and could bring the index lower to 5835.
Dow Jones challenging 13550
Following other Global indices the US Dow Jones index had managed to push higher by mid-week. With the technical trend in bullish mode since the start of this the index also sees a potential divergence warning which could see a sharp pullback over the coming week again. This week the correction led to a higher high but bullish momentum will need to stay intact if the Dow Jones is set to challenge the13550 target. Some traders feel that a larger degree Double Top pattern may prevent the index from moving much further than 13550 but we have yet to wait and see how the index behaves at the target.
Crude Oil continues to edge higher
Although oil has seen a move above last week’s high we are now seeing a pullback to this week’s opening price level. What does this suggest? On a bullish note the commodity has shown the potential for further gains. But failing to hold onto the high of this week means that weakness has yet to be overcome if oil is going to reach for $100.00 and going into next week it will be important to not break below $93.50 otherwise oil could see another leg lower. Volatility is offering opportunities for daily trades and this should be set to continue unless of course we go into narrow range days.