As expected the markets fell lower reaching initial support bases. With three time frames showing bearish signals the markets may be in a position for further declines.

Although short term momentum appears to be reaching a possible reversal for 1-2 days, we cannot rule out the option for a continuation to the downside. With both momentum and chart patterns indicating that bears are in control, the bulls may have a tough time ahead over the next week.

FTSE 100 falls towards the 5178 level

The FTSE 100 declined to the initial 5178 level where we may see support for the short term. However with weekly and daily charts now confirming a bearish move to the downside is in progress the 5104 support level may become the next price target. In order to negate this view the index will need to climb above 5340 to test the all important 5435 resistance level.

We note that the momentum index has now also posted a bearish signal supporting the case for further declines. Unless a sharp reversal takes place immediately the bears may have the upper hand.

Dow Jones at initial support level

With a five wave pattern completed to the upside the move lower extended into last week’s trading. In spread betting, the index is currently at the 10106 level where we may see a short term bounce.

The 10415 level needs to be cleared in order for the index to reach higher. But momentum indicators have now also confirmed that we could see the key 10,000 level being tested. The Dow is also below its 20 day Moving Average supporting the case for bearish moves. Overall the index still appears to be in a larger degree range bound pattern. A break above 10415 or below 10167 should determine the next move.

Crude Oil falls back towards channel base

As noted previously, Nymex Crude Oil failed to hold above $80 and with a Technical bearish pattern on the Stochastic Indicator a move to the downside was expected. Following through on this basis Oil is now back near its channel base around the $69 - $72 level.

Currently the commodity may find support at $74 or if weakness continues then lower support comes in at the$68.35 level. We may see further range bound moves in oil between the $68 - $80 range until the commodity proves otherwise. Stochastic indicator is now at lower levels suggesting a move high for the short term may be possible.

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.

Neither City Index not Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.

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.

Neither City Index not Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.

Although the markets closed lower in last week’s trading we have seen an upturn on momentum. This would suggest that the move to the downside may be a temporary pullback.

Since the start of 2010 we had witnessed a decline from the January highs suggesting bearish factors were in play. However the month of July proved that the bulls may be back in control.

The key question is are we seeing a short term spike up or is there more upside potential?

FTSE 100 clears above 5331 level

Previously the FTSE 100 had played out a Double Top pattern at the 5331 level. A narrow pullback reversed the bearish pattern to clear above the resistance level and now seems to be heading towards the 20 day moving average for potential support.

But we note that the MA is pointing towards the upside. The conflict we have is that momentum has turned lower. Immediate price action would require the index to stay above 5215 – 5170 to tackle 5435 as the upside key objective.

Dow Jones flirting with 10594

Once again the Dow Jones spread betting market has attempted to break above the important 10594 level. Initial resistance at 10385 has been cleared but the index needs to turn positive fairly quickly in order to maintain a chance at aiming for the 10630 level.

If we continue to see higher highs then a possible attempt towards 10906 may be on the cards.

The 10200 mark remains important support coinciding with the 20 day Moving Average otherwise the floor could open for a potential decline towards 9915.

Short term momentum is positive which should help the index remain positive as long as we hold 10200.

Crude Oil may breakout to the upside soon

The September Nymex Crude Oil contract has managed to get back above the 20 day Moving Average and see a positive turn on the momentum index.

Long term the commodity is still trading within a channel of $70-$80 but recently Oil has spent more time above the 20 MA rather than below.

This may be hinting that further upside potential may be on the cards.

For now as long as we stay above $75.00 the upside objective becomes $80.00 - $83.60

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.

Neither City Index not Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.