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Levels to watch: FTSE 100 and Dow

Hopes of early gains for the new year have been dashed so far, as European markets drop sharply on the first full day of trading for the year.

FTSE 100 knocked back to 6600

The FTSE 100 certainly has a new year hangover, as it heads back to 6600 in early trading.

The failure to hold on to 6750 in over the previous two sessions was a worrying sign, and then the drop through Monday’s lows at 6674 also indicated that the buyers had lost control. Further declines target the 6540 lows seen last week. While the index is now oversold intraday, a bounce needs to move back above 6674 and then make another attempt on 6750 to provide a more bullish view.

Dow surrenders 23,000

The futures opened higher last night but since then, selling has pushed the Dow Jones back below 23,000 again.

The inability to hold 23,000 is a worrying sign for buyers, but the index is still up over 6% from the pre-Christmas low. If this higher low sees buyers enter to push the price back towards 23,000, then the general move higher in the short term may still be intact. Potential areas of support to the downside are 22,320, 21,700 and then 21,500. The index needs to move back above 23,400 to reassert the uptrend and create new higher highs.

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