Monday weakness pulls markets lower but trend bullish

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.

06/02/2012, Sandy Jadeja, Chief Technical Analyst, City Index 

Monday weakness pulls markets lower but trend bullish

After a strong close in last week’s trading session, Monday has seen weakness which could lead to a pullback in the markets. Depending on how deep the retracement is the opportunity to a further move higher still exists for stock indices. However the current trend still remains bullish unless key support levels are breached. The markets may also see a sideways move develop if we see momentum decrease into the pullback. Gold prices have also seen a pullback and there are early signs that the commodity may be experiencing signs of further weakness in the week ahead. But we will need to see further evidence before turning bearish. See key levels below:

FTSE 100 support now resides at 5820

If the index declines this week the FTSE will be looking to test support levels which were initially resistance levels. This is typical once markets break through price barriers. However lower levels of support should also be monitored in case we see a deeper retracement. For now 5820 is the initial level for support, followed by 5690. More importantly for the bulls we would need to keep in line with positive momentum so that the trend continues to the upside despite the pullbacks. The weekly charts and monthly charts remain strong and so this should help lift the index.

FTSE 100 Daily

Dow Jones pulls back at resistance zone

It seems that the Dow Jones may be in a Wave 3 formation and a pullback would be healthy for the index. Keeping an eye on 12630 but more importantly 12450 is essential if we are to see higher prices for the index. Similar to the FTSE 100 the Dow is also in a Bullish trend until a reversal takes place. Wave 2 sits at 11769 which really is the key to prove that a push higher is still on the cards. The index is just below its upside target of 12891 – 12935 but once a correction has completed this is likely to be reached over the next week or so.

DowJones Daily

Gold trading back at support

As expected the price of gold has retreated and is now back at a support level of $1715. This level needs to provide a base for gold to reach towards the $1780 – $1800 target. Lower support is at $1680 which is the key level for the intermediate term trend. An ABC type of pullback may take place before a trend continuation lifts the metal higher into mid-March or possibly into late February. The trend is bullish on the Daily and Weekly charts and hence the expectation to see $1800 still remains a strong possibility. We continue to see how this trend will develop over the weeks to come.

Gold Daily