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Levels to watch: FTSE, DAX and Dow

A major downturn for stocks spark calls for a market top. Are we just seeing a retracement or something more significant?

New York Stock Exchange traders
Source: Bloomberg

FTSE falls into major support confluence

The FTSE has followed its US counterparts in the past 24 hours, with the index falling to a key support level. The cluster of trendline, Fibonacci (76.4%) and simple moving average (200-period on four-hour) support at the current 7306 region means this is a critical juncture.

An hourly close below that level would point towards further downside, where we would come closer to negating the uptrend in play over the past two-months. For that to happen we need to see a break back below 7262. Until then, there is a chance this is just a retracement set within a wider uptrend. Previous occasions of an oversold stochastic with a deep retracement have typically sparked another surge higher. Will we see the same here?

DAX double top points to losses

The DAX has broken below the key 11,909 support level, with the index continuing to move lower this morning.

There is a chance we could see the index move into the 76.4% retracement and find support on that level, which highlights the fact a break below 11,720 would provide greater confidence we are going to see a more protracted downturn.

Dow consolidating after sharp downturn

The Dow Jones is consolidating this morning, after a hugely significant pullback yesterday. We are clearly at risk of a rebound, while another leg lower is also a distinct possibility. Signs suggesting which is going to occur may be found on the shorter intraday charts.

The 30-minute chart below highlights the 20,611 level is currently the mark to break to the downside, where an hourly close below there would likely spark another leg lower. Conversely, an hourly close above 20,665 would start to bring a more bullish outlook.

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