Bears Take Control of Spread Betting Markets

Posted on | August 16, 2010 |

With a conflict between chart patterns and technical indicators, the indices headed lower after a five wave completion towards the upside. An ABC correction may be on the horizon with the opportunity of lower prices for the weeks ahead.

Unless a strong move toward the upside takes place this week, the weight of evidence sports lower prices with key bearish trend changes forming across several time frames.

FTSE 100 falls lower on weakness

Unable to tackle the 5435 resistance level the FTSE 100 also fell below 5245 to reach a low of 5210 in last week’s trading session. The index is now also below its 20 day moving average with momentum confirming weakness. However, with recent choppy price action the indices have tested both the bullish and bearish levels causing frustration for traders across both spectrums. This week the index will need to stay above short term support 5178 or a drop to 5104 may be on the cards. Resistance stands at 5314 – 39 followed by 5375.

Dow Jones causes concerns for bulls

With the US Dow Jones index failing to hold 10630 the index has lost -4.2% from the 10719 high. We note that the resistance level of 10630 has now proven to hold the index back from reaching higher. A break below 10395 confirmed the move lower as well as the completion of the 5-wave pattern to the upside.

Currently the index needs to find support at 10297 – 10167. A break above 10700 is required for upside moves in the near-term. Momentum appears to be bearish given the recent decline.

Crude Oil unable to sustain $80 level

A temporary push above the $80 level failed to lift the commodity to higher prices. Coupled with an overbought Stochastic indicator the expected decline lower back towards the $75 level has now placed oil in an uncertain position. For a bullish move back towards the $80 - $85 level the week ahead will need to see a strong move higher. The $70 is still an important support level and if Oil continues to trade inside the $70 - $80 range then traders may find a choppy few weeks ahead. However technical indicators are currently bearish which suggest lower prices may not be ruled out just yet. The bulls will need to clear $80 fairly quickly to negate a bearish take on oil.

Please remember that Spread Betting and CFD Trading are leveraged products that carry a high level of risk to your capital and can result in losses that could quickly exceed your initial outlay. These products may not be suitable for everyone, so please make sure you fully understand the risks involved.

Spread Betting and CFD comments by Sandy Jadeja, Chief Technical Analyst, City Index.

The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.

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