Markets at a decision point for reversal or continuation

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.