Confirmed reversals pull markets lower as expected
City Index May 8, 2012 4:06 PM
<p>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 […]</p>
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.
08/05/2012, Sandy Jadeja, Chief Technical Analyst, City Index
Confirmed reversals pull markets lower as expected.
As support levels failed to hold the UK and US stock indices we witnessed sharp reversals last week in line with our forecasts. The decline is expected to continue this week but a counter trend snapback cannot be ruled out to the upside. What is interesting is that both the FTSE 100 and Dow Jones are now in sync with bearish trend reversals on the daily charts. This clearly suggests that the recent lows are likely to be retested fairly soon. Also this could set the stage for the Weekly chart to finally become bearish for the intermediate term trend that is likely to see the markets thrust lower into the June time frame. See key levels below:
FTSE 100 trading below key support.
Now that the FTSE 100 is trading below 5690 level and failing at the important 5820 resistance barrier the index is most likely to reach for 5580. Near term the index will need to stay below 5800 and also close below 5690 by the end of this week to stay on track for the move lower. Sideways trends can be difficult to trade and a clear break below 5580 is required to see a trend continuation for lower prices. For now as long as the index remains below the 5800 – 5820 level the index remains weak. On the very short term hourly charts the index does appear to be at a low and a shallow bounce may be due by mid week.
Dow Jones confirms bearish reversal
After attempting to break above 13270 but unable to clear the fourth attempt the Dow Jones fell sharply below 13111 to bring the index lower. This week as long as the Dow Jones remains below the 13111 level the bears are looking to drag the market back down to the 12700 objective. Since last Thursday the trend reversal stage has once again turned bearish on a momentum basis. Previously the Dow Jones had seen three reversals but none of which had seen any major damage. We will await and see if this attempt will be any different. The range between 12700 – 13270 remains intact for the intermediate term.
Gold must hold $1630 level or else
On several occasions Gold has attempted to break below $1630 but has held the support level since late March. However much of last week the metal spent much of its time trying to close below on but had not succeeded. This week the commodity may see weakness continue to take the price of Gold below $1630 followed by $1600 and then $1585 as the main objective. The trend remains bearish and overall on a longer term chart the current move appears as a consolidation to suggest lower prices ahead unless $1675 is cleared.
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