Indices bullish in Friday s trading

With Friday’s trading being mildly bullish but in a narrow range, the outlook into next week may take a hint from today’s range. Typically when a market trades sideways or in a contracted price action mode a breakout is probably just around the corner.

The FTSE 100 has traded below its key resistance level of 5445 – 5460. This area has been a difficult hurdle for the index over the last three months. It appears as if going into next week the index may need to clear this hurdle otherwise a negative December could be on the cards. The recent low of 5366 remains a key pivot level and if the index continues to struggle at the 5460 level expectations of 5200 is probable.

With the DAX we have seen weakness and also a reversal pattern from last week has continued into the close of this week. If a follow through continues the Dax is likely to trade down towards 5600 unless it manages to get above 5805 by next Tuesday. The 5600 level should offer support but a failure here could turn into something more serious and see the potential for 5400 as the next base level. We have also seen weakness in gold. The metal has fallen through its key support level of $1680 and reached its lower target of $1575 this week. Going into next week the commodity really needs to hold onto $1575 otherwise we may be looking at $1530 – $1500 before an attempt to rally lifts the metal higher. Even if gold does manage to trade on the upside it may face a challenge at $1680 as a potential resistance level.

Crude oil was unable to clear the $100 level and has also fallen below $95.30 which could now take the commodity down towards $90.00 where there has been a previous consolidation pattern. This may help oil to stabilise but momentum has turned bearish on the daily timeframe since Wednesday. If this continues then oil may turn bearish on the weekly chart which of course may take oil much lower and possibly even to the $85.00 level.

Markets should see lighter volume going into next week as traders square of positions before the Christmas season but we could see choppy trading as markets conclude their direction towards the end of next week.

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