Sharp rally negate bearish reversals but facing resistance
City Index July 30, 2012 7:31 PM
<p>The late rally seen towards the end of last week have seen markets turnaround from a bearish reversal to which now seems to be in […]</p>
The late rally seen towards the end of last week have seen markets turnaround from a bearish reversal to which now seems to be in a bullish reversal mode. This is not the first time this has happened in recent weeks. Previously during the month of June the same scenario occurred where we witnessed a trend reversal to the downside only to be cancelled out and then experienced a move towards the upside into a wall of resistance. Currently even though we have seen two days of a move higher the markets will need to overcome resistance barriers again to confirm that this is a bullish move rather than a false reversal. See key levels below:
FTSE 100 back above 5595
Even though the UK FTSE 100 index has turned bullish based on Friday’s move, the start of this week will need to see a follow through. Once the index breaks above 5631 it will then need to sustain the move and aim for 5700 where the index faced a struggle to overcome the resistance barrier. If cleared then the road could be paved towards the 5775 – 5825 level where it will once again need to prove that the strength will be able to move forward. Now that momentum has turned positive the bears will need to take the index below 5475 and 5400 to take control and bring the index lower again.
Dow Jones finally reaches 13060
For several weeks I mentioned that there is a possibility for the Dow Jones to see 13060. However the early part of last week started to show signs of weakness by creating reversal patterns at 12835 and also providing divergence signals that indicated the Dow Jones would be heading lower. But the late unexpected turnaround has once again placed the index in a position to move higher. If the index does indeed follow through then the obstacle to climb will be at 13190 followed by the 13338 high. If a summer rally commences it will need plenty of thrusts to lift this market higher and not just a few days of steam.
Crude Oil may be back on track for $100
The longer term trend for Crude Oil has been bearish. But the recent move from late June has lifted the commodity from a low of $81.46 towards $94.64 and looks as if there may be more room left for higher prices. Oil will need to maintain a firm hold above $80.80 and for the short term it will also need to stay above $89.00 to stay on track for higher prices. Once Oil reaches $92.80 and can close above this level for three days it will then require a move above $96.00 followed by $100.00 per barrel. Breaking below $89.00 would not be good and likely to take oil back towards $80.00 and lower in the coming weeks.
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