October may bring sharp falls across global indices

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.

03/10/2011, Sandy Jadeja, Chief Technical Analyst, City Index 

October may bring sharp falls across global indices

Given that there has been no significant improvement on the bullish side, stock indices still appear to have a bearish bias unless strong momentum reversals take place soon. Although we are still trading within a channel, we note that lower highs are suggesting weakness is still apparent. October tends to see market declines and looking at current patterns traders may want to be ready just in case a storm is brewing to take these markets sharply lower. Oil prices also remain weak and are showing weaker trading patterns but the possibility of higher prices cannot be ruled out just yet. Key price levels are provided below:

FTSE 100 continues to decline

Breaking below 5050 – 5015 puts the FTSE 100 back into a bearish stance again. Recent trading activity has seen the index unable to reach for 5445 and in fact last week’s high also came in with a bearish pattern to help take the index lower into the start of October. It would take a break below the key support level of 4780 to confirm that the longer term trend is taking control but at present daily charts remain bearish and a break above 5250 could see a glimmer of hope for the index to reach for the important 5445 level again. Overall the sideways patter is likely to break out soon.

FTSE 100 Daily

Dow Jones trading close to key level

The Dow Jones Index is still holding onto the 10800 level but if this fails to hold, then 10590 is a decision maker for this index. A clear break below 10590 would indicate the longer term trend basis. The monthly chart could help the bears take the Dow Jones lower towards 10430 as a support area. Several momentum studies and trend indicators have now turned bearish on the monthly time frame and that bodes bad news for the bulls who are attempting to lift this index higher. The resistance level that needs to be cleared comes in at 11472 and until then the trend remains bearish.

Dow Jones Daily

Crude Oil looking weak again

After 12 bullish momentum months, a negative September has indicated that if crude oil breaks below $77 then the commodity could well be on its way towards $60 per barrel. The monthly chart shows a bearish momentum turn but only on a break of the $77 level. It would now take a move above $91 for Oil to turn bullish and see the $100 mark again. ABCD reversal patterns tend to be quite reliable and if true in this case, $60 may even open the door to see oil fall much lower. On a short term basis upper resistance remains at $84 to $86 per barrel.

Crude Oil Monthly