Bullish start for markets but already at resistance levels

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.

03/01/2012, Sandy Jadeja, Chief Technical Analyst, City Index 

Bullish start for markets but already at resistance levels

A positive start for the markets has seen stock indices rally into resistance levels which will require further bullish momentum to provide headway for further gains. With a potential bullish pattern developing the markets could see a sharp rally ahead. This would see a strong start to January which could suggest a potential turnaround after a disappointing 2011. However there are probably some steep bumps ahead and the bears will be looking to drag the markets lower at any opportunity available. Meanwhile gold has fallen lower into the expected price target and could see weakness in the week ahead unless it clears upside barriers. See key levels below:

FTSE 100 holding steady at 5600

Currently the FTSE 100 holds onto the initial resistance level of 5445. Now that the index has reached 5,600 the key will be to sustain this level for the week ahead and target the upside barrier at 5820. For now the index has proven its bullish case and will need to ensure that support at 5460 is not breached. The potential bullish Head & Shoulder pattern is still developing and it would be interesting to see how this week pans out to see this pattern materialise. The real key is to smash through 5820 and aim for 6,000 this quarter and possibly 6250 as a main objective.

FTSE 100 Daily

Dow Jones reaches target

After clearing 11819 the Dow Jones made headway and broke through 11930 as expected. The bullish scenario has rewarded us, with the index now at its key target of 12350. What happens from this point will be interesting. Basically the Dow is within a tight channel of 12350 – 12140 which once broken should reveal its next play of action. If 12350 is cleared the next objective comes in at 12545. However we will need to watch closely for false breaks and a reversal below 12140 which could see the Dow fall back towards 12000 and possibly re-test the 11735 level.

Dow Jones Daily

Gold continues bearish play

As expected, gold fell into the month end of December. After falling through support at $1,680 the downside objective of $1,575 had been reached with a low in at $1,523 so far. For now the commodity will need to clear above $1,615 and $1,645 to turn around for a short term reversal. But traders will need to watch the $1,575 support level which if breached again may indicate that there could be further downside ahead. It could be that Gold may be reaching for $1,500 – $1,475 if the metal weakens this next week or so. The trend remains bearish until it clears $1,645 for now.