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Levels to watch: FTSE, DAX and Dow

Bullish momentum continues to be the order of the day ahead of key releases tomorrow.

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A DAX sign
Source: Bloomberg

With the markets awaiting a Wednesday jam-packed full of potentially market-moving announcements, it would be understandable to see an element of hesitancy within global indices. However, the DAX seems unrelenting in its charge higher and to some extent it looks like this could rub off on the FTSE and Dow Jones as the day goes on.

FTSE remains bullish above 50-DMA

The ability of the FTSE to push above the 50-day simple moving average (dSMA) yesterday was a major hurdle in the recent resurgence seen in this index. The bounce off the 200-dSMA this time last week appears to have provided a platform for the recovery and as long as we continue to create higher highs and higher lows on the intraday timeframes, I expect to see a continuation of this bullish momentum.

With the daily MACD histogram closing in on the bullish cross above parity, I take this to indicate that we are well within the recovery, but not necessarily at the end of it. With the stochastic also rising from the most oversold levels we have seen since December, it does look like a strong recovery could be in order.

Resistance levels I am watching for are around 6867 (61.8% retracement and early March support) and ultimately the multiyear high of 6965.

DAX consolidating within bull run

The imposition of quantitative easing within the eurozone has given the DAX an additional shot in the arm in recent weeks, and for many this appears to be the biggest one-way trade alongside EUR/USD weakness. That being said, amid all this strength comes marginal pullbacks and I expect that is where the opportunities will arise for a better entry point.

Yesterday’s 247-point jump higher appears to have overshot somewhat for the time being, with today seeing a move lower in the early part of the European session. However, I believe this will be short-lived, given that previous pullbacks in the last month have barely managed to reach the 23.6% retracement before moving higher again.

Support levels to watch out for are the 38.2% Fibonacci retracement of 12,111 and 50% pullback at 12,077. In the near term, resistance is at 12,221, but I believe we will go significantly higher than this in due course.

Fibonacci support sends Dow higher

The Dow Jones has been moving higher since pulling back to the 50% retracement of the 2 February low to 2 March high. With tomorrow’s impending Federal Open Market Committee statement geared towards the possible removal of the word ‘patient’, there is certainly potential for a move lower should that occur. However, for the time being, we appear to have formed a bottom, at 17,624 and the creation of intraday higher highs and lows is painting a picture of likely upside for today.

Much like the FTSE 100, the Dow has seen the MACD histogram bottom out and is now moving higher towards parity. Near-term resistance appears to be provided by the 20-dSMA, yet I expect the biggest challenge would come at 18,264, which is the all-time high set earlier this month.

There is certainly room for a fundamental shock tomorrow when Janet Yellen takes the stand, but all things remaining equal I believe the underlying trend remains bullish and the 50% Fibonacci support provided last week should give us enough of a base for the next move higher.

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