Markets could be in major trouble

<p>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 […]</p>

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.

As global stock markets have rumbled with a break to the downside this now placed key indices at dangerous levels. With todays decline across all markets support levels are being broken and this suggests that we could be facing another major leg to the downside. Both the FTSE 100 and Dow Jones are now trading within a hairline of prices which if violated is likely to set the stage for a very nasty September to October period. Gold prices have also now turned short term bearish with today seeing the metal reaching the key $1,750 price level. Key price levels are provided below:

FTSE 100 at critical level

Having failed at the 5445 resistance level the FTSE 100 has now reached 5060 which is a Pivot Level that indicates the index is likely to fall further. Just below we have support resting at 5015 and another major Pivot level at 4930. If we see the index trading at these levels and close the week below these prices then it is more than likely that the Month of October will revisit 4780 and probably trade lower. How low can the FTSE fall to? Although it sounds unrealistic at present there is the chance that we could be looking at 4460. For the bearish view to be negated the FTSE will need to clear above 5445 very soon.

FTSE 100 Daily
FTSE 100 Daily

Dow Jones confirms bearish pattern

The Head and Shoulder bearish pattern noted in previous reports has now materialised. If we see clearance below 10,800 then the chances favour a much steeper decline for the US index. Clearly the 11,365 resistance level has managed to push the index lower. This week already is setting the stage for another month ahead where the Dow Jones is likely to trade lower and see 10,430 become a reality. Below this level we have 9673 as a major retracement level. Any surprises could bear a shock to the system and quickly propel prices lower.

Dow Jones Daily
Dow Jones Daily

Gold turns bearish after failing at $1,890

With weakness in Gold prices taking place the metal is now also turning bearish according to technical indications. The momentum model shows a Red bar in formation which now indicates that there could be lower prices for Gold ahead. Currently initial support rests at $,1750 followed by $1,700. Beyond this if the metal falls sharply then we may even visit $1650 as a key support level. For Gold to head higher it would need to overcome the Double Top pattern at the $1,890 level but is looking unlikely for the next week or so.

Gold Daily

Gold Daily

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (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.