Markets at a decision point for reversal or continuation

<p>The stock indices have reached a point of decision. Typically at price inflection points we can see either a reversal take place or a trend […]</p>

The stock indices have reached a point of decision. Typically at price inflection points we can see either a reversal take place or a trend continuation after a brief consolidation. The current patterns suggest we are seeing consolidation as noted by the narrow range bars seen over last weeks trading action. The trend has been bullish from a momentum perspective but this does not rule out a corrective move to the downside. Traders may want to focus on the fact that month end rallies are often seen and this week may follow this historical pattern followed by a correction thereafter. See key levels below:

FTSE 100 tests lower support at 5830
We have seen that the FTSE 100 has found resistance at the upper resistance of 5900 so far. Previously the 5830 had been the key focal point. At present from a technical standpoint the index may now find support at the 5830 level. However, a break below and more importantly a close below 5830 by the close of Friday could set the stage for an intermediate term decline heading into October. What is really required is a momentum reversal which so far has not emerged. Therefore any downside moves may be corrective only. For the upside we would need to clear 5900 to reach for 6000 – 6150.


Dow Jones sees six days of congestion
There was no real direction for the Dow Jones from last week’s trading session. A meaningful rally would need to develop only if we see a move above 13646. Currently the positive aspect is that the index has still stayed above 13550 and this indicates some strength for the moment. But a trade below 13500 may change the dynamics for the short term. If we see a move lower into the start of this week with a break below pivot support then traders may see a move towards 13338 as the next line of support. Momentum like other indices remains on the bullish side until a trend reversal occurs.


Gold has developed uncertainty
At the current level the price of gold has shown its hand of being uncertain. This simply means that as it has reached its initial target of $1,770 there may be a brief pullback before seeing a continuation to the upside. For this week to continue higher the metal would need to break past $1,786 to then reach towards the second objective of $1,840 and then towards the $2,000 level. If this week sees a move below $1,750 then a pullback towards $1,675 may be likely. It is important for gold to remain above $1,609 to retain its bullish momentum for the intermediate term basis.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (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.