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CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

FTSE 100, DAX and Dow slump into critical support levels

FTSE 100, DAX and Dow are on the slide, yet key hurdles remain if we are to call the beginning of another wider market sell-off.

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FTSE 100 continues its decline from Fibonacci resistance

The FTSE 100 has been on the slide this week, following a rally into the 61.8% Fibonacci resistance level at 6003. There is no doubt that we could be in a position where this index could be forming a major top, yet that wider bearish signal only comes with a break below the 5666 level.

Until then, it is a case of following the short-term downtrend until that has been debunked. As such, a bearish short-term picture is in place until we break through the prior swing high (currently 5879). To the downside, the next notable support levels come at 5799 and 5748.

FTSE 100 chart Source: ProRealTime
FTSE 100 chart Source: ProRealTime

DAX drops into critical support level

The DAX appears to be ahead of the FTSE 100 in its decline, with the pair breaking trendline support to trade within touching distance of the critical 10,369 low from early May.

A break below that point would signal a high likelihood that we have seen this market top out. Nevertheless, with the stochastic looking to have potentially bottomed out, a break through the 20 level could bring a bullish swing in momentum. Ultimately, the outlook for the DAX will be determined by the ability or inability to break through the 10,369 low.

DAX chart Source: ProRealTime
DAX chart Source: ProRealTime

Dow Jones declines take index back to key support

The Dow has similarly declined into a critical area of support, with the ability to remain above the 21 April low of 22,940 key for bulls. A break below the point would bring the lowest level in over a month and potential herald another strong move lower almost two months after the mid-March bottom.

Much like the DAX, the stochastic is crossing over within oversold territory. That may not provide a bullish signal, with a rise through the 20 mark required for such a sign. Looking at the past three occasions of such a break back up through the 20-mark, they have providing strong buying opportunities for the index. As such, we await a break through 22,940 (bearish) or through 20 on the stochastic (bullish) to guide our next move.

Dow Jones chart Source: ProRealTime
Dow Jones chart Source: ProRealTime

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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