Markets pullback as expected after extended moves

The beginning of this week has seen both the UK FTSE 100 and US Dow Jones pullback as expected after last week’s extended move to the upside. Whilst the trend remains bullish the stock indices may have reached a level where some traders may be looking to take profits. We could see further upside moves once the corrective phase has passed and this could present a good opportunity to capture another swing to the upside if we are to see a trend continuation. Depending on much of a correction we see the potential to shave between -1-2% which could transpire over the coming week. See key levels below:

FTSE 100 will need to hold 6000
Recently the UK FTSE 100 cleared the psychological 6000 level and almost reached 6100. But today has seen a pullback which should not be of too much of a concern for the bulls providing key support levels are respected. For the short term the index will need to sustain the 6000 level but more importantly the 5900 level should provide a solid support level. The trend based on Momentum is still in a bullish phase and hence the expectation for further upside could be a strong possibility. On a short term horizon the index could see a decline of approximately -100 points unless the FTSE 100 clears above 6100.

Dow Jones falls lower towards 13338
A key level for the US Dow Jones has been 13338 and it appears that we may see this level act as a support on a very short term basis. If the index falls further we may see the index decline towards 13230 as a lower objective. To rule out a corrective decline the Dow Jones will need to instead move above 13450 to prove it still has strength to then reach the 13550 target. Having turned bullish on a momentum basis since last Wednesday after the strong upside move the likelihood of reaching 13550 should not be a major problem for the index. For now a correction could be healthy.

Crude Oil requires a further confirmation
Last week the price of Crude Oil showed strength after the recent decline from the September high. Having found support at $89.00 the commodity seems to have provided a potential Momentum reversal. But this will require the price of Oil to move above last week’s high of $95.38 which could then pave the way to the $100.00 target again. But if on the alternative hand Oil continues to fall below $91.77 then most likely it would prefer to re-test the $89.00 support level again. This could instead take Oil lower if support fails to hold. Buyers will need to come in to avoid this scenario.