Stock Markets fall sharply whilst Gold rallies
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.
01/06/2012, Sandy Jadeja, Chief Technical Analyst, City Index
Stock Markets fall sharply whilst Gold rallies
The end of the week has brought further losses to stock indices. This is in line with the bearish trend as seen by the Red Momentum Bars. The patterns on the Daily Charts suggest that there are further declines ahead before the indices can create a counter trend rally. Until a Weekly Reversal bar has been created the bears are in control and leading into next week the markets remain fragile. The concerning factor is that the longer term charts are now projecting much further losses over the coming month. There could be nasty surprises in store if caught on the wrong side as volatility increases.See key levels below:
FTSE 100 breaks support level
Currently the FTSE 100 has still not established a low for the index to rally to form the next lower high. Once a low is in place the index could recover some lost ground but only to set the stage for a further move lower. The coming week may help the index complete the current bearish swing but only on the basis that the support levels hold. Right now the index has broken below the 5288 level suggesting that the 5050 target is the next key support target. If the FTSE 100 manages to close above the 5288 level next week then a short term low may be considered if the week following breaks above the high.
Dow Jones could lose a further -5%
With a brief retracement which barely made it to the minimum requirements the Dow Jones has broken below 12311 and 12270. This is clearly not a good scenario for the bulls who would have like to have taken the index towards the 12700 resistance target. If the Dow Jones witnesses a trend continuation then this really places the index in a weak position leading into next week. It is important that the Dow Jones gets above 12495 to negate the bearish play at least for the short term. A free fall scenario appears to be developing and caution is required until a key reversal has been established.
Gold rallies from Support base
On the back of falling stock indices Gold has finally managed to reverse its recent bearish trend. Today sees the development of a Blue momentum bar and if Monday trades above the high of today this could set the commodity for further rallies over the coming weeks. A flight to safety could help Gold prices regain some of its lost ground. The metal has managed to break above $1,600 and now suggests that the next target will be $1,640 followed by $1,670 which is the May high. What Gold needs to see is a pullback followed by a higher high to help the commodity get back on the bull train
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