Levels to watch: FTSE, DAX and Dow

Bearishness is once again breaking out, as the weakness in US markets last night spreads to Europe.

Source: Bloomberg

FTSE 100 looks to have topped
Having finished back below 6000 yesterday, it now looks as if we are in the final stage of the topping process. If the index closes below 5900 today, this would be the signal for more weakness with the price heading into the middle of the channel, retracing much of the rally of the past two weeks.

Downside targets would be around 5800 in the first instance, and then on towards 5736. Some of a very bearish disposition would be looking to the bottom end of the channel around 5500, but this seems a bit overambitious for now. It would need a fresh close above 6000 to negate the current bearish outlook.

DAX looks to move lower
A close below 9330 today would be the signal for a bigger move lower for DAX, especially as the daily Relative Strength Index (RSI) rolls over and moves back below its 50 mid-point. Targets to the downside would lie around 9138, and then on down towards 9044 and then 8800.

Price action in between 9300 and the peak from last week around 9600 would imply further consolidation, with only a break higher above 9600 signalling a move to the 50-day Simple Moving Average (SMA) at 9820 is in store.

Dow puts bears on the front foot
The failure to push on beyond the 50-day SMA yesterday puts the bears back on the front foot, with downside targets around 16,270 and then on towards 16,075. It is now likely that we see extended selling, potentially taking the index back below 16,000, especially if oil weakness continues. We would need to see a close above 16,600 to reverse the current expectation of further downside. 

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