Further declines cannot be ruled out just yet

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.

12/09/2011, Sandy Jadeja, Chief Technical Analyst, City Index 

Further declines cannot be ruled out just yet

Clearly the momentum has been bearish for global indices on the intermediate term time frame. However with the short term time frame now also in line with the main trend, this puts stock indices in a very weak position again. September is historically within a bearish time period and it comes as no surprise to see markets declining as they hit upside resistance levels. However the patterns are revealing that there could still be one more push higher before seeing a major thrust lower. Gold prices have also seen a pullback, unable to make it to the $2,000 level as expected. Key price levels are provided below:

FTSE 100 at crucial levels

The FTSE 100 index is dangerously close to key pivot levels. 5015 and 4930 will need to be watched closely to provide traders with further clues as to whether the index is going for a double dip or if we are looking at buying into the decline. The index is below its 20-period moving average as well as breaking a short term parabolic curve. This suggests that the trend remains firmly bearish until the 5370 – 5445 levels have been cleared. There is the possibility for the FTSE 100 to remain in a choppy sideways move until the key upside or downside levels have been broken.

FTSE 100 Daily

Dow Jones must hold above 10,800

The US Dow Jones has not managed to climb above 11365 and is now flirting with the 10800 level. It is important that the index stays above this support level as it remains a key pivot point which if broken would indicate that an ABC corrective pattern has completed at 11716 and that the index is likely to take out the major 10605 level. The nearest target for the index will be at 10312 once a clear break of 10605 takes place. To negate the bearish outlook the Dow should break above 11716 to reach for 11950. This is not looking likely given that we are close to 10800.

Dow Jones Daily

Gold must clear $1,890 resistance

So far gold has struggled at our resistance target of $1,890 and also now appears to have created a Double Top Reversal pattern. The intermediate term trend is still bullish and declines could offer buying opportunities above $1,645 but this would depend on how sharp the pullbacks are. The weekly chart would prefer for gold to remain above $1,790, of which a break may see gold drop down to $1,700 as initial support. The 20-period moving average shows no signs of a major turn just yet but there are early warning divergence signs on momentum indicators.

Gold Daily