Another push higher maybe on the cards before a correction

Sandy Jadeja, Chief Technical Analyst at City Index, analyses the market to identify key technical levels for major commodities and indices markets including the FTSE 100 and Dow Jones this week.

05/03/2012, Sandy Jadeja, Chief Technical Analyst, City Index 

Another push higher maybe on the cards before a correction

Last week’s price action may provide a clue to what lies ahead for the stock indices. Given that the markets saw a minor decline, overall the consolidation taken place over February may see a breakout take place this month. There are no guarantees that this will take place but the likelihood of a range breakout is increasing. The question is will it be to the upside or downside? At present there exists an opportunity for markets to pop higher and fulfil upside targets before seeing a meaningful decline to satisfy the bears. Gold had seen a sharp reversal last week and also retested the $1715 level. This indicates further weakness. See key levels below:

FTSE 100 continues sideways move

Unable to make any headway over the last few weeks the FTSE 100 is still stuck between the wall of 6000 and 5820 as support. Ideally the index should at least touch the 6000 level with the opportunity to even reach for 6100 – 6250 as an extreme. The concern is that the narrow range contraction bars are showing signs of slowing down from the recent bullish trend. As an alternative this may also just be a bullish consolidation which could lead to a thrust higher. Either way, breakouts from trading ranges are difficult to forecast and once the move has started we will be able to ascertain the next directional move.

FTSE 100 Daily
 

Dow Jones holding onto support level

There have been several reversal opportunities for the US Dow Jones in last week’s trading session. However the index has held above 12880 with a low at 12882 so far. This week could retest this level and if the week closes below then the short term top may be in place. But this does not rule out the index reaching for 13111 and further if positive momentum gain can be achieved. This week the Dow will need to stay above 12880 otherwise the bullish outlook must be put on hold until a correction has been satisfied. Lower support remains at 12450 as the key level and if the trend reverses 12000 becomes an objective.

DowJones Daily

Gold reversal may signal weakness

With a sharp pullback and a short term trend reversal Gold has opened the door to a correction this week. As the metal has traded below $1705 this suggests that the target will likely be $1660 for short term support. The longer term trend remains bullish and unless Gold sees much lower prices the pullback could offer buying opportunities for traders seeking to catch more of the uptrend. If stock indices are in for a key reversal Gold may be setting up for much higher prices in weeks to come. The objective of $2000 per ounce may be on the horizon fairly soon.

Gold Daily