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Levels to watch: FTSE, DAX and Dow

If Cyber Monday was risk-off day with a side order of erratic commodity moves, today looks like we may be witnessing something of a turnaround in equities.

Data on a screen
Source: Bloomberg

It must also be said that the first trading day of December is traditionally a weak one in the equity space which was clearly exacerbated by the declines and subsequent fluctuations in the oil price.

With oil prices stabilising and precious metals staging a mild rebound, the moves in early trade look promising. The FTSE 100 is presently outperforming its European counterparts owing to bounce in the oil sector, and the DAX has finally established a move through the psychological 10,000 level for the first time since June. The question is whether or not the various speeches from no fewer than three Federal Open Market Committee members will allow the upside to be sustained as the day progresses.

FTSE could test 6600

The FTSE has recovered from yesterday’s lacklustre session and price action has driven back above the 200-day moving average. Once again the 6640-50 level has come to the rescue of the UK benchmark and the next level to overcome will be the recent resistance around 6773. A daily close through here would certainly allow the FTSE to make inroads towards the highs at 6905 last seen in September.

The 133 point range; in place since November 21 would, if resistance is convincingly breached, allow for a measured move to upside. However, any deviation below the 6640 level would likely result in a test of the 6600 level with support then coming in around the 6585 level and the 61.8% retracement of the move from the October lows to the highs.

Hourly relative strength index is looking a mite overbought so we may see a small retracement before the next leg higher. Intraday, this support lies around 6700-10.

DAX daily RSI overbought

With the DAX finally successfully motoring through the 10,000 level, we must now look to the record highs at 10,048 for the next upside target. A break above this would target the next pivot point at 10,079. Daily RSI is also fairly overbought and we are quite a distance from the 200-DMA which lies some 5% below current price action. Near-term support lies at 9943, then 9906 comes in below.

The bullish channel which has featured since the lows on October 16 is still valid but we may be looking at a degree of sideways action in the near-term, owing the negative divergence on the H4 and H1 RSI.

The buy on the dips scenario still holds but until we hear what Mario Draghi has to say this Thursday, investors may be wary of getting ahead of themselves.

Dow finds support at 17,716

The Dow Jones, a mere whisper away from the 18,000 level, seems to be finding the 17,892 level a little difficult to break, topping out at this level over the past two weeks. Support came from the 17,716 level yesterday – we must keep an eye on this range particularly since the daily RSI is still residing in the overbought zone. This indicator has been overbought since the end of October so it doesn’t necessarily mean that the markets are about to flop.

A break through 17,878 today would look to challenge the recent highs and put the Dow on a move towards 17,930, then the big round number.

Intraday, support comes in at 17,825, then 17,800 but as long as price action bid remains above the key hourly Mas, the propensity for additional upside remains the bias.

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