Week Beginning 13/02/2012.

Value 12801.23

The market spent the majority of this week gradually making new highs, but failing to hold at these levels by the end of each day. Indeed end of day market movements were very low whilst the intraday swings were significantly larger. This all suggests that market momentum has been exhausted and the sizeable fall in prices at the end of the week potentially confirms this.

It now remains to be seen whether the resistance levels previously passed through will provide support as the market falls towards them. The first level to be tested will be that provided by the Fibonacci 78.6% at approximately 12743 (Figure 1). In the past this level has failed to provide significant support and therefore it is unlikely to offer much resistance if the bears are determined to push the markets value lower.

Figure 1

However it should be noted that the RSI Index (Figure 2) is already relatively low with little room for it to fall significantly further. This combined with the strength of the MACD amongst other indicators suggest that any short-term falls can still be viewed as market consolidation rather than a definite shift in market direction.

Figure 2