Markets in a possible reversal zone

<p>As the markets have edged higher we are seeing mixed results across several stock indices. Currently the UK FTSE 100 index remains below its key […]</p>

As the markets have edged higher we are seeing mixed results across several stock indices. Currently the UK FTSE 100 index remains below its key target of 5820 but has also held onto the 5600 support level. Meanwhile the US Dow Jones has shown a higher level of strength and is now approaching the 13000 level. Interestingly the Dow Jones is also creating a pattern that suggests that a larger degree decline is possible in the weeks to come. Right now though, as it approaches a resistance level we may see the index pullback short term. Gold has managed to reverse its short term bearish outlook by clearing a key level and turning bullish. Key price levels are provided below:

FTSE 100 on route to 5820

As the index continues higher we can see the FTSE 100 reaching for the key 5820 level. If the US markets take the lead then it is likely the resistance target is likely to be met soon. However there remains the possibility that the FTSE may struggle initially at 5820 but eventually reach for the 6000 level. This week the index will need to hold on to support at 5690 which if broken could take the FTSE down to 5595 short term. The trend remains bullish and so pullbacks could offer buying opportunities but with caution at current levels. Also, the reverse Head & Shoulder pattern seems to be playing out nicely so far.

Dow Jones aiming for 13000

So far the Dow Jones has cleared past several upside objectives. Right now the index is trading above 12545 and approaching the 13000 level. Just above we have 12891 – 12935 which if cleared could open the door to 13111 as an objective. Also the current move appears to be a minor wave 3 which could see the Dow pullback and then complete wave 5. On a larger degree picture the key high is likely to take place between March to April before a meaningful correction takes the index lower by approx -9% or more. For now like other indices the trend is still in bullish mode.

Gold reverses bearish mode

After clearing $1615 – $1645 Gold is reaching for the $1680 level. This will need to be accomplished soon so that the commodity can then aim for $1715 – $1800 as the upside target. On the short term the metal will need to hold above $1642 to ensure it stays on track for the upside targets. The intermediate term trend however is still bearish so the immediate trend could change any moment if we see wide range bars to the downside. The current swing also appears to be a correction to the upside and will need to surpass $1800 to provide a key change in direction.

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.