Market rallies may be a technical rebound

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.

11/06/2012, Sandy Jadeja, Chief Technical Analyst, City Index 

Market rallies may be a technical rebound

Given that we have seen a sharp bounce from the support levels provided in previous reports, the rallies may be for the short term only. What is clear is that the trend remains bearish until we have seen a clear trend reversal on the longer term charts and at present there has been no signal to provide a strong confirmation that the stock indices have bottomed out just yet. It is possible that any upside movements that may be developing may last for a brief period of time before seeing a trend continuation to the downside. Until such occurrences have taken place the bears are likely to hold the upper hand. See key levels below:  

FTSE 100 trading below 5595 resistance

The support level of 5250 has certainly provided a good base for the index to rally from. So far the FTSE 100 has respected the 5250 level and managed to hold above to attempt a rally towards the 5525 – 5595 target on the upside. As far as the Daily chart is concerned there is a possibility that the index could reach as high as the 5600 handle before breaking lower to break past the 5250 support level and reach for 5175 as the next support target. If on the other hand the index does manage to clear past 5595 then upside objectives could reach as high as 5800 before seeing lower prices again.

FTSE 100 Daily

Dow Jones to remain below 12680

If we see the Dow Jones trade higher this week then the index may look to remain below the 12680 resistance level. It is quite possible that this level can be taken out but until the bearish trend has been reversed traders may see rallies as potential shorting opportunities. This week the index will need to stay above 12400 otherwise it could trigger another selloff to take the index back down to the 12217 level and below. Much will depend on the Dow being able to hold onto the 12217 support level. A Weekly close below this level could spark a sharp move below the psychological 12000 level.

Dow Jones Daily

Gold struggling to get above $1650

The past week has seen Gold attempt to get above $1650 but fail. The downtrend which has seen Gold fall from $1800 to a low of $1526 has created a scenario where the commodity could now be setting the stage for higher prices. Although the current price action has turned bearish, if stock indices see another move lower and Gold can sustain a hold above $1525 then the opportunity to break past $1650 could open the door to retest $1800 again. If Gold drops below $1560 then the bullish scenario could be negated and instead see Gold drop lower towards $1480 as the next key level.

Gold Daily