Where next for stock indices

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.

10/10/2011, Sandy Jadeja, Chief Technical Analyst, City Index 

Where next for stock indices?

Strong momentum lifted stock indices in last week’s trading session but does this suggest further bullishness? Given that we are still stuck within a trading channel what is apparent is that volatility continues to trip both the bulls and the bears. It would be premature to say at this stage that there is no potential for upside movements but if the stock indices fail to break out on the upside the bearish factors still rule and October’s habit of sudden surprises’ just be lurking around the corner. As expected Oil hit the first price objective and closed higher but caution is still required for this commodity. Key price levels are provided below:

FTSE 100 closing in on 5445

Once again the FTSE 100 is aiming for the key 5445 level. There has already been three attempts to break above this level and if the forth attempt fails then we could see a potential sharp decline. Even if the index does manage to clear 5445 the hurdle at 5600 must also be managed before turning longer term bullish. On the larger degree time frames such as the Weekly charts the current move can be classified as a Bear Flag. If the index falls below 5250 then a failure at 5445 would have indicated the continuation to the downside is more than likely.

FTSE 100 Daily

Dow Jones hits downside target perfectly

We noted that trading below 10590 could take the Dow Jones down towards 10430. The index traded with a low at 10404 and then had a sharp rally to close the week at 11103. This week will need to see the Dow trade above 11231 to lift the index towards 11350 with a possible move towards 11641. It is important for the Dow to remain above 10850 this week otherwise the 11716 and 10625 may be seen as potential support. Again the index has seen lower lows and lower highs and until this pattern is broken the moves to the upside can be considered as a correction to the main trend. A breakout is required soon.

Dow Jones Daily

Crude oil trades below $77.00

Currently Crude Oil enjoys a rally to the upside after reaching our target of $70.00 as a minimum objective. This week’s resistance at $84 – $87 and more importantly at $91 will need to be watched closely. If the commodity fails to break above $91.00 then Oil could fall back below $77 to seek further bearish moves down to the $60.00 level. What really needs to happen here is for Oil to stay above $71.00 if there is any hope for the bulls to reverse the recent downtrend. But over the next few weeks the pattern that develops will paint a more certain picture.

Crude Oil