Weakness continues to bring markets lower towards support

<p>As momentum has continued to the downside, the markets have almost reached a support level. Traders are anticipating a major decline but so far we […]</p>

As momentum has continued to the downside, the markets have almost reached a support level. Traders are anticipating a major decline but so far we have seen what appears to be a correction. To really see a strong decline the indices will need to continue to the downside into next week. Ideally the markets should break below this week’s low and then continue lower. If this scenario takes place then this suggests a reversal may firmly be in place and go beyond a normal correction. Otherwise the alternative scenario is another push higher but the pattern prefers a push lower. See key levels below:  

FTSE 100 may test 5700 level

If the UK FTSE 100 continues lower next week the opportunity for the index to reach 5700 is likely. Previously we can see that the FTSE 100 had attempted to break past 5700 four times as this was clearly a resistance level. Eventually a thrust higher lifted the index to the next target at 5830 and we may now see the index drop lower towards the previous resistance which could now become support. If we see a series of red bars occur then that would indicate a trend reversal may be at hand. But until that happens traders can assume that the 5700 level may hold at least for the short term.

FTSE 100

Dow Jones tests previous resistance

We can observe that the Dow Jones has now tested the previous resistance level of 13060. Now the index will need to decide if this will hold or fall below to continue lower. Here too the momentum is bullish until proven otherwise. So the current move may also count as a correction but if we see a move higher and it is unable to break past the recent highs followed by a move lower, then that could form an ABC pattern suggesting that a further decline may be in the making. Again patience will be required but for now 13060 may provide short term support for the Dow Jones.

Dow Jones


Crude Oil showing signs of uncertainty

With a clearance of $96.30 the price of crude oil has move slightly higher but not with enough strength. Currently on the weekly chart the commodity appears to be forming an indecision pattern. If next week breaks below this week’s low then we could see a move back down to the $96.00 level or else a move above this week’s high to lead to a trend continuation to the expected $100.00 target. So far the price of crude oil is short by a few points from the $100.00 level and if cleared, to set sights on the $106.00 level. As long as $92.60 holds then upside possibilities could increase.

Crude Oil

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.