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FTSE, DAX and Dow weakness could bring buying opportunity

The FTSE, DAX, and Dow drift lower as Pelosi stokes US-China tensions, but that weakness could soon bring a buying opportunity.

FTSE 100 finds Fibonacci support once more

The FTSE 100 has continued to struggle in its attempts to push higher, with markets seemingly waiting to draw a line under Nancy Pelosi’s visit to Taiwan this week.

With China embarking on military exercises on all sides of the country, tensions are clearly high. However, Pelosi reportedly plans to leave today, which could bring a relief rally to stocks and remove some of the risk-off sentiment that has been taking hold.

For the FTSE, we have seen price fall back into the 61.8% Fibonacci level once again this morning, with that point of support again holding strong.

With the index clearly still trading within a bullish pattern over the past three weeks, it makes sense to view this current pullback as a buying opportunity, with a bullish outlook in play unless price falls back below the 7308 swing-low.

DAX expected to push higher from recent consolidation

The DAX has been taking a breather this week, with recent gains having taken the index into a fresh six-week high.

The declines seen over the course of this week thus far take price back down towards trendline support. Quite whether we see the index head higher from this trendline or break lower remains to be seen.

However, the bullish pattern playing out over the course of the past three weeks brings expectations that this period of weakness is a precursor to price heading higher once again.

As such, a bullish outlook holds as long as price remains above the 13029 swing-low.

Dow falls through trendline support after nervy period

The Dow has similarly been heading lower this week, with Pelosi’s visit to Taipei sparking a risk-off move in anticipation of a breakdown in US-China relations.

However, traders should have grown accustomed to standoffs between the two nations, with fears typically subsiding soon after any confrontation.

On this occasion, we are likely to see the bulls come back into play once the House Speaker leaves the island nation (today?).

As such, while the downside seen over the course of Monday and Tuesday have taken us down through trendline support, there is a strong chance that this current pullback will bring a good buying opportunity.

A break below the 31694 swing-low would bring about a bearish picture given the wider trend evident over recent months.

However, until that happens, this current pullback looks like a potential precursor to another move higher once Pelosi leaves Taiwan.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. 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.

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