Have markets created key reversals

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.

02/04/2012, Sandy Jadeja, Chief Technical Analyst, City Index 

Have markets created key reversals?

We have seen the pullback from resistance levels as expected. What is also apparent especially on the UK FTSE 100, is that on the daily chart we have a rounded top formation and on the US Dow Jones we have a Double Top pattern. Both have bearish implications and could be the start to further declines. But the Weekly and Monthly charts have yet to provide solid clues as to how steep the correction will be. Over the next week the markets could spell out if this rally is over or just a correction in the recent rally we have experienced. Gold has continued to fall lower as highlighted in previous reports and continues to weaken. See key levels below:

FTSE 100 turns Bearish again

The first aspect for the FTSE 100 is that momentum has turned negative once again. However this time the index has traded below 5805 and we now have a key line in the sand at 5880. The index has struggled at the 6000 resistance target and has also traded below 5820 support. Currently the lower target remains at 5690 with potential for further lows ahead. If the FTSE 100 trades above 5880 this would negate the bearish view and turn the market around to face the 6000 – 6150 level. Much depends on how much positive momentum the index can pick up into next week.

FTSE 100 Daily
 

Dow Jones creates Double Top pattern

The 13270 level as previously forecasted has created a barrier once again for the Dow Jones. But the index has not turned bearish based on momentum indictors. This conflicting situation creates an uncertain situation which could see either a thrust higher next week or a continuation to the downside to confirm that the Double Top Reversal pattern is firmly in place. On the downside the index has broken below 13150 suggesting that the 12700 target is still a possibility over the coming weeks. For the bulls it would require a strong move above 13270 to lift the index higher.

DowJones Daily

Gold may head lower if it falls below $1630

Gold has played out accordingly to the recent forecast of reaching for the $1630 low. So far the commodity has respected this level and as it has been unable to break above $1715 we may see a retest of $1630 again. Also note that the metal is still negative with momentum as indicated by the red bars. Until we see a reversal with a blue bar the odds suggest that lower prices may become a reality if Gold continues below $1630 to reach for the $1600 level. If $1715 has been cleared then the $1800 level can be expected.

Gold Daily