Expectations of a market decline met successfully

<p>As per the previous report highlighting the aspects of technical divergences as well as the stock indices being at key resistance targets, we have seen […]</p>

As per the previous report highlighting the aspects of technical divergences as well as the stock indices being at key resistance targets, we have seen the sharp decline in Monday’s trading which could now lead into a nasty decline to lower levels this week. What is important is the close of this week. This should provide important clues as to how the next few weeks are to pan out. From the current picture it seems as we could be in for some serious falls and lose as much as -10% from the current levels. Although this sounds unrealistic at this stage the market showed similar signs in May which led the market lower into June. See key levels below:

FTSE 100 could be on route for 5430

The FTSE 100 has broken below 5650. Weaker momentum on the upside with a Double Top pattern has managed to bring the index lower. What is also important is that once again with the pattern formation and also bearish momentum the index appears to have set the stage for what looks like the early stages of a larger degree move to the downside in the coming weeks. Tuesday will need to trade below Monday’s low to confirm that the trend has turned bearish and that the index is to potentially trade lower towards 5430. Once this occurs the index could see a move up and then another move down.

FTSE 100

FTSE 100

Dow Jones completes wave count

So far the Dow Jones had attempted to move towards 13060 but failed to climb above the 5th July high. If the current pattern has completed then we may now be on the verge of seeing the index test 12450 initially. Thereafter the potential for much lower prices could develop into an ugly scenario where the Dow Jones could shave approximately -10% from the current high. This could happen over six weeks and take the index down towards 11675 by August 24th which would be a similar move from the May high to June low. If the index trades above 12977 this would negate bearish views and take the index to 13060.

Dow Jones

Dow Jones

Gold prices still range bound

Slowly the price of Gold is edging towards $1,547 which once broken may lead the way towards $1,485 as a price target. Given the weakness in stock indices it appears as there is not interest on bullishness for this commodity. With a stronger US Dollar and no signs of Dollar weakness just yet the metal may stay on target for weaker prices into August. Once a low has been established Gold may then start a move back towards $1,677 but it will require a break above $1,607 to confirm this. Until then the trend remains bearish as confirmed by the red bars.

Gold

Gold

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