Levels to watch: FTSE, DAX and Dow

European and US indices find a bid, as overnight gains continue this morning. However, this looks highly likely to return back into a bearish trend again.

Data board
Source: Bloomberg

FTSE 100
The index has got off to a strong start this morning, as it moves towards the crucial 6130 mark. The existence of a symmetrical triangle formation highlights the indecision after Friday’s lows and as such, we await the breakout from this tightening range to provide us with direction.

A closed hourly candle above 6130 would provide a more bullish outlook, with a close below 5955 looking likely to spark another leg lower for the index. Given the current proximity to the 6130 mark, it makes more sense to be short given the weakness coming into this pattern. 

In a similar manner to the FTSE, the DAX has seen a strong overnight session, with the index rallying towards the 76.4% retracement. This seems a good place for bears to go short once more, with a break and hourly close above 9591 required to negate the recent downtrend.

As such, a move lower is expected, despite this recent rally. The stochastics also confirm this view, given it is the most overbought we have seen it since Friday’s Brexit vote. 

Dow Jones
The trio is wrapped up with the Dow Jones, which is in a very similar situation. We have a heavily overbought market, which is rallying into the 17,300 region (76.4%), set within a downtrend.

With that in mind, this current move looks like an opportunity to get short at a better price. A bearish view is held unless we see an hourly close above 17,374.

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