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Levels to watch: FTSE, DAX and Dow

Could we be seeing a reversal of fortunes, with European indices turning lower, while the US markets start to show signs of strength?

Trader in a New York Stock Exchange
Source: Bloomberg

FTSE tumbles into crucial support level

The FTSE has seen another strong move lower this morning, following on from weakness throughout last week. We have seen nothing to say this trend is going to stop and further losses could be on the cards. With price now almost back to the crucial 7127 mark, there is a chance we could start to see a challenge to this morning’s losses.

Given the highly extended nature of today’s sell-off, this support level is going to be absolutely crucial. An hourly close below 7127 would point towards further downside. However, watch out for potential reversal candles as a sign that a bounce could be upon us. 

DAX range continues to dominate

The DAX is similarly turning lower this morning, with the recent range once more coming into play following Thursday and Friday’s rally into the 11,636-11,646 region. Given the break below 11,545, we have now completed a double top formation, which targets a move back into the 11,446. The current break below the 11,521-11,530 support zone points towards a deeper pullback than has typically been the case over the past three weeks.

However, be aware this pullback is perceived as a retracement of the rally from 11,401 and as such, these pullbacks are seen as an opportunity to get long around the 11,471 level. That bullish medium-term view would be negated with a break back below 11,401.

Could Dow be turning a corner?

Just as we see European indices following the bearish lead of their US counterparts, we have seen some signs of strength across the likes of the Dow Jones. Namely, that comes in the form of a trendline break and subsequent rally through 19,825 resistance. This comes off the back of an attempted fall through 19,720 support last week.

That level marked the completion of a double top and perhaps the subsequent rally points towards the unwillingness of this index to fall much further. With that in mind, we would require a break back below 19,676 to provide a bearish view once more, while a push up through 19,848 would provide a bullish view. In the meanwhile, watch out for trendline support as a potential source of strength for the Dow.

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