Levels to watch: FTSE, DAX and Dow

Selling continues apace, with a fresh drop overnight in China putting European indices on track for a difficult day.

Data chart
Source: Bloomberg

FTSE 100 remains oversold
Most of December's rally has been surrendered, with the index rapidly heading towards the crucial support zone around 5874/5900. We can expect a closely-fought contest there between buyers and sellers, although for the moment the latter are firmly in charge.

Intraday charts remain on the oversold side of things, so while more losses look likely, it might be wise to wait for a bounce back towards 6050, with traders watching the hourly relative strength index/stochastics for a better entry, rather than chasing the market at these extended levels.

A drop through the December low puts the August bottom around 5768 in focus.

DAX may benefit from a bounce
DAX buyers will be mounting an early defence of the area around 9880, which provided support in mid-October 2015. However, with bearish pressure still evident they will have a tough time halting the downward momentum.

A move below here heads towards 9823, and from there it's on to 9670 and then the September/October lows at 9500. As with the FTSE, it might be wise to wait for a bounce, with an hourly trendline coming into play as high as 10,150, which would still leave the current descent intact. 

Dow still in sell-off mode
The lows of November and December are far above current levels, and suggests the index is still in full-blown sell-off mode. Fresh downside targets lie around 16,616 and then 16,418, and below this could see a swift drop to 16,000.

The hourly downtrend enters the frame at around 16,850, which would provide a potential selling opportunity for those either looking to get on board this downward move, or to add to existing positions. 

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