Expect further declines over the coming weeks

<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.

08/08/2011, Sandy Jadeja, Chief Technical Analyst, City Index 

As confirmed in the previous report of Monday 1st August rallies are likely to be short lived. The interesting technical factor which has taken place is that the Intermediate term trend has now confirmed a Major downturn on several timeframes. This means that although we can expect a reversal bounce this is likely to be met with further selling pressure in the coming weeks and months ahead. On the back of this Gold prices are likely to continue its uptrend as traders look for safe havens in the current turmoil. Commodity and FOREX prices as a whole are likely to also pick up on volatility as an alternative trading vehicle preferred to stocks for short term traders..

Sandy

Expect further declines over the coming weeks

As confirmed in the previous report of Monday 1st August rallies are likely to be short lived. The interesting technical factor which has taken place is that the Intermediate term trend has now confirmed a Major downturn on several timeframes. This means that although we can expect a reversal bounce this is likely to be met with further selling pressure in the coming weeks and months ahead. On the back of this Gold prices are likely to continue its uptrend as traders look for safe havens in the current turmoil. Commodity and FOREX prices as a whole are likely to also pick up on volatility as an alternative trading vehicle preferred to stocks for short term traders.
FTSE 100 to fall to lower support targets
Unable to break above 5996 the FTSE 100 sliced through support levels paving the way for Bears to remain in full control. The start of this week is likely to break below 5200 which would then confirm that the FTSE 100 is on target to reach for 5092 and over the coming months 4781 as a Minimum target. Short term if the index can manage to break above 5395 then a bounce is possible but limited to 5650 before the next leg takes the index lower. It now seems that the months ahead are in the hands of the Bears as they return to create turmoil in the markets.

FTSE 100 Daily
FTSE 100 Daily

Dow Jones on route to 10860
Although it might seem unreasonable to expect markets to fall further as some traders are looking for a rally given the recent losses, the technical patterns suggest that the US Dow Jones is most probably going to aim for 10,860 – 10,312 as its base support target. Within the current move there is the opportunity for a rally but only as a “Corrective” move rather than an Impulsive move suggesting that the index is probably in trouble on a grander scale. Once we see lower highs and lower lows this will only re-enforce the selling pressure which waits ahead. Resistance stands at 11,755 – 11,964 on a break above 11,555.

Dow Jones Daily
Dow Jones Daily

Gold enjoys rally with more to come
Gold prices continue to move higher whilst investors seek safety. But short term traders are also enjoying the positive momentum staying with the trend and looking for Gold to reach for the all important $2,000 per ounce. But along the way $1,727 needs to be cleared and Gold must also ensure it stays above $1,600 as a support level. Technically the 20 Period Moving Average also supports the rising trend and coincides with the support level nicely. Once $1,727 is cleared we look towards $1,890 as a price target.

Gold Daily
Gold Daily

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.