Weakness in stock indices may see break of key support levels
City Index September 19, 2011 4:28 PM
<p>The start to the trading week has seen stock indices fall back after nearly reaching key resistance levels. This is not a good starting point if […]</p>
The start to the trading week has seen stock indices fall back after nearly reaching key resistance levels. This is not a good starting point if the markets are to thrust higher for a final push to upside levels. Overall the bearish factors are still intact but last weeks price action suggested we may have been in line to see a possible re-test of the recent highs. This may now be in jeopardy if by mid-week the markets continue to decline lower. This would also place Gold in a favourable position to aim for the key $2000 level. It appears we are in for another week of volatility and traders should be braced for a whipsaw week ahead. Key price levels are provided below:
FTSE 100 stuck in a range
There has been no clear break above or below two key price levels for the FTSE 100 index. Whilst maintaining a stance above 5015 the index looked set to tackle the 5445 resistance barrier. But Monday has seen a sharp pullback after four days of gains. This puts the FTSE in an awkward position and will need to see a break above 5445 to reach for 5600 or break below 5015 to head lower towards 4781 again. Until either of these levels have been broken the index remains in a choppy sideways mode and is likely to frustrate traders until the breakout takes place..
Dow Jones shows another bearish pattern
Although the Dow Jones respected the 10,800 support level and also closing above the 11,365 level there is now a bearish pattern developing. If the index fails to take out the high of 11,716 then this could potentially form a bearish Head and Shoulder pattern with the left and right shoulder resistance at 11,530 and more importantly the 10,800 level acting as the decision maker. Any potential moves to the 11,950 level would be negated if the Dow fails to hold 10,800 this week. A clearance above 11,716 is required for the Bulls to take control again.
Gold provides confused signals
The $1,890 resistance level has pushed this metal lower with support objectives at $1,750. After a week of bearish factors weighing on the commodity the price of Gold almost saw the $1,750 level being reached. If $1,850 is cleared this week the $1,890 becomes the objective once again on the upside. On the other hand if Gold breaks below last weeks low of $1,763 then the support levels of $1,750 followed but $1,700 could be in sight for the near term. Also the 20period Moving Average has now shown a declining slope which may suggest difficulty or a slowdown for reaching the $2,000 level.