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Consolidation could lead to thrust higher

Article By: ,  Financial Analyst
December 12, 2011 4:15 PM

As the markets clearly provided in-decision signals noted in the previous commentary, we have seen the expected pullback take place. Currently the stock indices are edging lower and as long as there is not a wide range expansion to the downside then the opportunity for higher December prices can still be expected. Support levels will need to provide a base to rally fairly soon but light volumes are the norm during the December season. We also have seen Gold prices fall lower as indicated and the metal may still have further downside as stocks become favourable and commodities seem a little expensive. Key price levels are provided below:

FTSE 100 stalls at 5600 resistance

So far the FTSE 100 has stalled at resistance coming in at the 5600 level. There are some minor support levels which should help the index find a base to move higher. The key aspects to observe is that towards the end of his week trading volumes are likely to ease and we may see narrow range price bars going into the third week of December for the holiday season. But if bullish momentum is to continue then the index will need to hold above 5420 short term but more importantly we have 5287 and the 5200 level. Once 5600 is cleared the 5820 level becomes the next objective.

Dow Jones falls from resistance area

We expected a minor top given the signal from the market itself. So far the Dow Jones is looking to pullback lower and aim for support targets which now reside at 11745 followed by 11625. If we see the index trade below 11559 then the current bullish trend may have ended and could then lead to further declines negating the December rally. If support does hold then there is a potential reverse head & shoulder pattern in the making. This would indicate a sharp rally ahead and would be a nice setup for the Bulls to take advantage of. Until we see a trend reversal pullbacks are considered a bullish opportunity.

Gold turns declines as expected

The price of Gold has fallen to the forecasted $1680 support area and may now continue lower into the $1635 support level. If equity prices edge higher then the case for lower Gold prices would make sense. But as there is still uncertainty in the markets the overall larger degree trend remains bullish on the monthly charts. It is the short term daily charts which are bearish and once resistance has been cleared the Gold Bulls should be back further down the road. We cannot rule out a thrust lower in December and so lower support is at $1575 for now.

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