Hello and welcome to CantosCharts. My name is James Hughes from spread betting firm CMC Markets.

Today we're going to talk about some of the major indices. We're actually going to look at the US just to see if what's happening in the US is actually going to come over and affect us here in the UK.

Now what we've had recently, and this ties in from what we said yesterday in terms of the commodities, what we said on Tuesday in terms of the currencies as well, but US markets are starting to react in a very strange way when we start looking at economic data.

Very recently we've seen a lot weaker economic data. Last Friday we saw the non-farm payrolls come out much weaker than expected. But at the moment that all points to positive stock markets and again it comes through to our central theme this week which has been the quantitative easing story and exactly which way the Fed and other central banks are going to go in terms of more stimulus into the economies.

If we look at what we've got on this chart, again, we've got some Fibonacci retracements. On here we've got a 200 week moving average as well. This is a weekly chart, weekly candle chart. If you have a look at how we've been performing, of course we saw real big falls back at September 2008. We know what they were about. That was the credit crunch, the global crisis. Since then we've started to recover. This is the trend line from that at the start of that recovery. But if you look where we are now and take in the bigger picture, we are actually looking at almost a little bit of a range trade and we're really coming up to some really important upside levels.

Of course, from the big down move from the highs in 2007 to the lows almost March 2009 we have come up and we have bounced off of this 61.8% retracement level. Again, we spoke about these over the last couple of days. We came up and we tested it almost around the start of the year, really came off pretty heavily and fell lower. Yet again, moving along, broke the low, bounced off of the trend line on the downside for the Dow, broke back up through the 50% retracement level again, but this time it's the 200 week moving average which is going to start to cause us a little bit more of a problem.

If you see where we bounced off of the 61.8% level, that also coincided with the 200 week moving average. We came up, couldn't test it, it fell back lower. Again we're getting to the same thing. Of course this time our 200 week moving average is a little bit lower and what we've actually done, like we said yesterday on the CRB but on this weekly candle we've closed above the 200 week moving average. Now that is likely to be key in terms of us pushing up to the 61.8% level again.

Over here it looked to be key for us going through it. It didn't happen. This time we're looking with a little bit more optimism because the talk of quantitative easing is absolutely everywhere. Not just in the US, but of course in the UK as well. So if we do get these weaker economic data, every time it's looking that poor data means strong equity markets because stimulus is coming.

The same thing is happening in the UK. From the Bank of England we're getting exactly the same discussions, so because we've broken above and closed above that 200 week moving average, we're looking for a test of the 61.8% level if that stimulus comes in. If it does come in and it is as we expect, we could see a break above that.

Now looking at the S&P you could argue that it is pretty much exactly the same chart. The big fall down, we've got the Fibonacci from the big fall, we've got the credit crunch, we've got the recovery, we've got the test of the 61.8% retracement level, again we've got our 200 week moving average. What we haven't got this time on the S&P though is a real aggressive test of this and a close above it.

Now, of course, the S&P is seen as that broader market rather than the Dow Jones. So looking at the S&P, it's looking a little bit more bearish than what the Dow was but still looking particularly strong.

With this situation going on we've got major indices looking pretty much like this all over the world. So in Europe we've got the DAX, we've got the CAC, we've got the FTSE in the UK which is looking pretty much like this as well.

Everyone is in the same sort of story. The theme for this week has been quantitative easing and that's the whole story at the moment. If that comes in it's going to lead us to some real big gains. Breaks of this, or on the S&P, a test of this 200 week moving average and then maybe a test of that 61.8% retracement level.

Now if we do get to there this stimulus is going to have to have been big and it is going to have to work this time in the markets, but that's going to be the key thing. But in terms of these charts, we've definitely got on the Dow and the S&P some really big important levels to look out for and this reverberates around the world with the FTSE, the DAX and the CAC looking exactly the same.

Thank you for watching. My name is James Hughes from spread betting firm CMC Markets.