FTSE 100 heading lower into support targets

The FTSE 100 fell lower as expected in last week’s trading session. Both the UK and US indices have failed to climb above their respective resistance levels and has seen weakness bring the markets lower. Although they both are testing support levels at the close of last week the opportunity to see lower prices may carry the markets lower this week with a trend continuation in motion. There is a possibility of seeing a snap back rally as the indices are trading outside a volatility band which often occurs after short term pullback as seen recently. However, the short term trends have turned bearish and weakness is likely to continue. See key levels below:

FTSE 100 on route to 5630
The bearish double top pattern has managed to confirm weakness for the FTSE 100. Also the index has turned bearish from a momentum perspective by breaking below 5865 and 5776 whilst also staying below 5830. With these elements in place the index may now seek to trade lower towards 5630 as the main objective in the coming weeks ahead. If weakness increases then acceleration could see the target being reached sooner rather than later. But first the index will need to trade below 5750 – 5735 to confirm this view. A bullish reversal above 5900 would negate the short term bearish view.

Dow Jones reaches target perfectly
As expected the Dow Jones bearish play has taken the index lower. Failing to hold onto 13550 and also seeing a clear Candlestick reversal pattern at this level followed by a break of 13338 which also saw another Candlestick reversal pattern the index has confirmed short term weakness. At present the index has closed above support at 13060 which was the downside target. With Hurricane Sandy in motion the market will be closed until further notice. Upon opening the index should either move lower towards 12850 or if support holds then a move above 13155 is required to move towards 13250 – 13338 again.

Gold pullback in place but remains bullish
After reaching the $1,770 target Gold has managed to provide a text book pullback. Now the commodity would have to prove by staying above $1,609 that it still has legs to carry the metal higher. Currently bullish momentum remains intact unless we see a continuation this week to the downside and also by closing the week lower. For a bullish continuation the metal would need to move above $1,730 and then clear past the resistance level of $1,770 to reach for the $1,840 objective. Overall gold still appears to be range bound between $1,550 to $1,800 and a breakout should dictate the next major move.