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Levels to watch: FTSE, DAX and Dow

Better-than-expected Chinese data in respect of GDP and industrial production, along with some stellar quarterly earnings from Apple overnight has given European indices a push northwards in early trade.

Data on screen
Source: Bloomberg

ARM Holdings unsurprisingly saw renewed investor interest owing to the rather bullish outlook from Tim Cook last night. These gains have quickly been shed however, and with few macro releases on the calendar today the focus will remain on earnings for direction.

FTSE eyes five-year bull trend

The FTSE 100 has maintained support at the 6240 zone, and the 38.2% retracement, from the lows of June 2012 to the recent highs and now sets its sights on breaking the 6300 level. A move through the 6410-20 metric would see the index regain the five-year bull trend. There is hefty resistance here owing to the confluence of horizontal resistance and the trendline.

The 200-hour moving average has presented a barrier to upside since mid-September and this metric coincides with the 50% retracement from the October 9 highs to the October 16 lows. Channel resistance on the same timeframe comes in at 6350. Ultimately, we will need to see both of these levels challenged successfully if the 6400 level is to become a reality.

Any break back through 6240 targets the 6190.

DAX RSI looks positive

The weekly head and shoulders pattern will only be negated if we see a weekly close through 8900. A rise through 9200 is required if the DAX is to regain its uptrend from the August 2011 lows.

The daily relative strength index is looking perky and while above the 8800 level the next target is 8853. Heavy resistance will be found at 8900 and then 8940.

With price action above the short-term averages, the bullish cross of the 50- and 200-H MAs, and the appearance of an inverted head and shoulders pattern forming on the H1 chart we should now look for a move and a close through the 8880 level. This would break the channel resistance and set the DAX on a move towards 9000 in the near-term.

A move back through 8680 takes us back to 8550.

Dow finds support at 16,250

Having failed to rise above the 16,500 level yesterday, we may see a fresh attempt on this area today. A daily close through here would then see the Dow Jones head towards the 200-DMA at 16,592 — the rising daily RSI supports the bullish momentum. The 16,470 level was the target from the double bottom on the H1 chart and this has been completed but will remain an area to watch in the intraday.

A convincing move through here targets 16,500 while a daily close through this area puts the Dow on a move towards the 16,620 level – the 61.8% retracement from the 17,100 highs to the recent lows at 16,850.

Price action is now clinging to the 200-H MA which has also capped gains to a great extent on the US benchmark since the end of last month. Support comes from the 100-H MA at 16,250.

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