Technical analysis: key levels for FTSE, DAX and Dow

A steady stream of companies reporting earnings and a heavy macro calendar means this week promises to be one of the busiest, and we may find some of that elusive volatility creep back into financial markets.

DAX board
Source: Bloomberg

We may see some tougher sanctions imposed by the EU on Russia, which in turn may add to the uncertainty and bring its own version of volatility.

FTSE finds resistance at 6830

The FTSE started well, but has since faded the initial gains with price action retreating below 6800 and the 50-day moving average. The 6830-35 marker is still preventing the benchmark from striking higher and challenging the highs seen in early July.

The last number of trading sessions has seen the FTSE trade in a range with the 6770-5 level at its base, so this will need to hold if the market is to push higher today. A daily close through here brings us back towards the previous support and the 100-DMA at 6740.

There’s a fairly good chance, with little catalyst, we’ll be looking at a rangebound move today.

DAX losing early gains

The DAX has also struggled to hold on to early gains and has now declined below the 100-DMA. A push through the lows of 9595, seen on 21July, could see the rising trendline support from the June 2012 lows come into play around 9550. Below that lies the 200-DMA which has managed to avoid any true penetration for around two years.

Overhead resistance comes in at 9700 and the culmination of the 50-, 100- and 200-period moving averages on the one-hour chart. The relative strength index on the same timeframe indicates some positive divergence, so a push back towards 9875 could be on the cards.

Dow eyes return to 17,000

That negative divergence on the RSI has had its effect, with price action on the Dow Jones currently testing the bottom of the rising wedge formation at around 16,930.

As long as we remain above here, a run back up towards 17,000 and beyond remains the preferred scenario.

A move back through 16,930 (on a daily closing basis) brings us back towards 16,900 where strong support was witnessed earlier this month. Any declines through here would bring about a potential test of the 50-DMA at 16,865.  The rising trendline support, from the 2012 lows, lies at 16,800-10, and this level has been tested over the past month. The ‘line in the sand’ is essentially represented by the June 16 lows – just below the 16,700 metric.

This would also coincide with the 38.2% retracement from the April lows to the most recent all-time highs.

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