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Levels to watch: FTSE, DAX and Dow

A day after the European Central Bank’s surprise decision and markets are decidedly mixed. The DAX has made some gains, but the FTSE 100 has slipped back below the 6900 level.

Data on a screen
Source: Bloomberg

You have to feel somewhat sorry for the ECB. A cut in interest rates and an asset-backed security programme enlivened markets briefly, but the euphoria has not carried over into a second day. This is primarily because of non-farms today, but the lack of enthusiasm for the measures announced was already evident yesterday afternoon.

However, while this may be the start of a short period of weakness, as indices trim their overbought condition, the trend remains undeniably upwards.

FTSE eyes 6950

The FTSE’s inability to hold above 6900 yesterday sets the stage for some short-term down moves, with the focus on yesterday’s lows around 6856, and then towards the 6830 level once again. A close back through 6880 would put the emphasis back towards the all-time highs, with the closing high at 6930 and the record intraday high at 6950.

DAX looks strong

Of the major indices the DAX actually looks reasonably robust, although it is now overbought on the daily relative strength index and thus may suffer the same loss of momentum that has afflicted the FTSE and the Dow Jones. However, the close through 9700 yesterday puts the emphasis firmly to the upside, with a short-term target being 9800. 

The 100-day moving average could provide some support around 9654 if the index weakens this afternoon. Even a drop back to the 200-DMA around 9538 would still only constitute a pullback.

Dow Jones could test the 50-DMA

US indices couldn’t sustain their momentum yesterday, but for now the 17,000 zone is holding back any drop for this index. The all-time high around 17,154 remains unbroken and with the moving average convergence/divergence and RSI moving lower, my suspicion is that the index may test the 50-DMA at 16,915 in short order.

Further support is around 16,835, with the index still likely to bounce from this area. Meanwhile, the target on the upside is still the aforementioned all-time high.

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