Markets push higher but indicators not following through

<p>Whilst the US stock market has edged higher the UK has lagged behind and not followed through. This divergence may suggest that there could be […]</p>

Whilst the US stock market has edged higher the UK has lagged behind and not followed through. This divergence may suggest that there could be a lack of conviction and the bullish momentum may be short lived. If there is any real strength behind the recent moves then both volume and momentum has been lacking. However chart patterns are also showing some tell tale signs that could provide a clue to the next larger degree swing. The main point is will it be bullish or bearish? Much will depend on closing prices over a period of days and also the depth of range between the high and low prices. See key levels below:

FTSE 100 continues to trade sideways

The positive aspect for the FTSE 100 is that it has managed to remain above 5595 so far. Also momentum has been on the bullish side but has not seen a follow through by breaking out of its recent range. The index will need to clear above 5700 to prove that there is still a strong conviction for higher prices towards the 5800 area. On a short term basis the bears will need to bring the index below 5595 to suggest that the ABC pattern has been completed. If another move higher is on the cards then the pattern is likely to form a five wave move and complete an ABCDE formation. These then tend to lead to declines.

FTSE 100

FTSE 100

Dow Jones breaks higher into resistance

The US index had created a bullish reversal last week which has since seen the Dow Jones break above the high. But on a negative note the index has not yet cleared 12835 which is required if we are to see the 13060 level being reached. For this week the index will also need to ensure it does not trade below 12570 to sustain an upward bias. Traders may also notice that if 12961 is not broken then there is a potential head and shoulder pattern developing that could suggest a large degree move to the downside is around the corner. As we await to see the outcome the rewards of volatility should not be too far away.

Dow Jones

Dow Jones

Gold building pressure for a breakout

Once Gold has managed to break away from its constricting range of $1,607 resistance or $1,547 support the commodity is likely to see a substantial move. It may take some time for this to happen but once the breakout has started and momentum builds up then historically we have seen sizeable moves. There are no guarantees but the wait may be worthwhile and especially if the indices take a bearish turn and investors flock to safety in the coming weeks. It is important to respect that the bearish trend is still in play and may lead to lower prices towards $1,485.

Gold

Gold

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