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Is this decline short term or setting up for further falls

Article By: ,  Financial Analyst
July 13, 2012 12:15 PM

Now that we have seen the pullback in the stock indices which has brought some relief for the bears, the question is how much further can the markets fall? It may be a little too early to suggest an all out bearish move is at hand and until we see the Weekly trend change the current decline may be a standard pullback. It would take another week of sharp falls to turn the momentum indicators negative to point south. There is also a mixed picture between the FTSE 100 and Dow Jones. The UK index remains stronger whilst the US index has seems weaker. Gold also has taken a turn to the downside this past week. See key levels below:

FTSE 100 moves lower to test 5595

It has taken a few days but the FTSE 100 has finally pushed away from the 5700 upside target. Currently the index has tested the 5595 support level which had been the previous resistance level. After breaking below 5660 level we have seen a potential for further falls as low as 5430 in the coming weeks. The index will need to get above 5700 next week to negate the bearish outlook. On a positive note the index has still not turned fully bearish as we have not seen any signs of the bearish red momentum bars. Until this occurs the decline may turn out to be a corrective move to the downside. Next week should provide more clues.

FTSE 100

Dow Jones must break 12450

This week the Dow Jones fell below 12700 to trigger the index into bearish mode. This is coupled by seeing short term momentum turn bearish as indicated by the red bars. As long as the index remains below 12835 then further falls can be expected. Right now the Dow Jones could see a break of 12450 to confirm that the bearish tone remains into next week. If we see a momentum trend reversal or close above 12835 then the decline has been completed. But if the index fails at resistance then most likely rallies will be short lived and sellers may take full control for next week.

Dow Jones

Gold likely to break away next week

Even though Gold has been range bound the metal has shown signs of weakness. By remaining below $1,607 the objective of $1,547 has nearly been met. If the metal remains weak into the coming sessions we may see the lower side being tested and open the pathway to see Gold reach for $1,485 fairly soon. The flipside is to be cautious and watch for the move above $1,607 which would not necessarily indicate bullishness but rather a continuation of a sideways move. A strong breakaway next week is required to confirm the next direction and until then the metal remains rangebound.

Gold

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