Weakness drags markets lower to test support levels

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.

The start of the week has seen sharp declines for the UK FTSE 100, with the US Dow Futures pointing sharply lower. This is in line with bearish expectations as the stock indices had turned bearish with technical indicators confirming these aspects since the March highs. Since we have seen lower high and lower low formations, the trend has been clearly to the downside. As the decline continues we are approaching some key support levels which could help lift the markets, albeit briefly, or at least until we can see trend reversals with higher lows and higher highs. Gold has broken below support levels with further lows expected. See key levels below:  

FTSE 100 heading for 5407 support

So far the FTSE 100 has managed to stay on track to test lower price targets. We have seen the breakdown from the resistance of 6000, then from a secondary high of 5820. Finally the index fell through 5580 and is now set to challenge the 5407 level. As long as the trend remains bearish there is still the possibility of seeing even lower levels along the way. 5288 – 5271 becomes the next objective once we see a continuation of the trend. Along the way traders can expect a counter trend rally, with resistance at 5640 – 5685 on the upside. The rallies on the upside are likely to offer shorting opportunities along the way.

FTSE 100 Daily

Dow Jones heading for 12700

The 12700 level provided a good platform for the Dow Jones to rally in March and April. Currently the index is heading lower to retest this level again for the third time. If the support level fails to hold then this could open the door to see the Dow Jones reach for 12533, followed by 12285. Here too the trend has been bearish and failing to break above 13270 has clearly given the bears the chance to take control and bring the index lower. However there exists a possibility that the index could become range bound between12700 – 13000 if we see a good reaction at the 12700 level. This week should provide an answer.

DowJones Daily

Gold trading below $1,585 level

Gold prices have not had a chance to rebound after falling through the $1,630 support level. The dominant bearish trend has really brought this commodity down sharply. It appears that gold is likely to struggle now above $1,630 as this is likely to become a resistance. First it will need to climb back above $1,585 to prove that it has a chance of any higher moves. Most likely, as long as the trend continues to the downside, we could see gold fall as low as $1,530 this week. On two timeframes, including daily and weekly, this metal has a fair amount of work to do to turn this trend around.

Gold Daily