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Dow Jones likely to continue declining after elections

Article By: ,  Financial Analyst
November 5, 2012 3:40 PM

All eyes remained focused on the US Presidential elections. Whilst the outcome for the election is currently being considered a 50/50 scenario, the US markets have a bearish trend which has been in place since the 13550 level had pushed the index back down to 13060 which is a key level. The UK index has not provided any clear signals except that it has managed to stay above 5830 which may offer a glimmer of hope to tackle the upper resistance levels. Gold had seen a continuation to the downside last week but no major trend reversal signals have transpired just yet but this could change if the metal continues to fall lower. See key levels below:

FTSE 100 choppy price action
Having provided several false signals which suggested that the FTSE 100 may break lower the index has managed to hold steady so far. Since September the index has attempted to push past the 5900 level but failed to show any strength. This week the FTSE 100 has remained above the 5830 level which may help the index attempt a push higher but if we see a close below this level then the index may see the lower boundaries at 5740 being tested again. This could lead the index to then fall towards 5630 which is currently a key support level. The trend from a momentum perspective has turned short term bullish again.

Dow Jones holding onto support
If we see the US Dow Jones weaken after this week’s conclusion on the Presidential elections then the index could fall sharply. Given the fact that the momentum has been bearish from 13550 and breaking below 13338 but having found support at 13060 the opportunity for the bears could strengthen if the index closes below this level. For six days the 13060 level has been tested and if this forms a consolidation pattern the odds suggest a move lower towards 12850 – 12740 is likely. It would take a move above 13289 – 13338 to negate the bearish view.

Gold find support at $1,665
Four straight down days has brought gold Futures to a potential support level. If the metal stays above $1,665 this week then the recent decline may be considered as a standard pullback. But we would need to see a clearance above $1,730 to provide the first clue that the decline has completed. More importantly the price of gold would need to get above $1,770 to move towards $1,840 but failing to hold support could diminish the chances to see a bullish continuation. This week’s trading session should provide more solid clues by mid week. Right now the metal must remain above $1,665 for a trend continuation.

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