Levels to watch: FTSE 100, DAX and Dow
Overnight gains for stock markets have done little to change the outlook, with the recent breakdown for FTSE 100, DAX and Dow all expected to resume.
FTSE 100 rally likely to falter given recent downside break
FTSE 100 has been gaining ground this morning, following on from a bearish move at the start of the week.
The prior break below 7310 points towards the intraday uptrend being over and signals a high chance that the current rally will be a lower high. As such, the index looks likely to turn lower rather than break through the 7371 peak. With the 76.4% currently being respected, watch for a potential bearish shift from here, where a rise through 7371 would be required to negate this bearish view.
DAX upside unlikely to last for long
DAX is also gaining ground, but the creation of lower highs and lower lows is clear.
Given the size of the decline yesterday, we could see further upside over the coming hours. However, as long as we do not break through the 12,267 swing high, another bearish leg lower looks likely before long.
Dow turning back into downtrend
Dow Jones is showing the same picture, with the break below 25,627 signaling a high likeliness that this current rally is a retracement rather than another surge into a higher high.
As such, watch for a bearish shift from here, where a break through the 25,951 peak set on Friday would be required to negate this bearish outlook.
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