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Levels to watch: FTSE, Dax and Dow

Greece’s defiant stand has rattled markets across the board this morning, with widespread losses continuing a trend that began on Friday evening.

London skyline
Source: Bloomberg

Yet again US indices finished last week relatively strongly, only for futures markets to sell off after the close. This set the stage for a weaker open this morning, but the picture has been clouded by the Greek prime minister, who, in a barn-storming speech, firmly declared that Greece would not seek a bailout extension. A clash between the country and the rest of the eurozone is now almost inevitable.

FTSE hit by Greek crisis

The index has opened sharply lower this morning, moving outside of the 100-point range that governed this market for most of the past week.

Daily pivot points suggest support around 6740, with 6620 being the next target. The RSI continues its move lower, as the negative divergence I highlighted last week takes effect.

Any bounce will target the 6900 peak from last week, although with the Greek crisis entering a new phase this seems a distant target. The loss of the rising hourly trendline means that the emphasis here has shifted to the downside

DAX tests 10,600 level

Eurozone markets have been even more heavily affected by the Greek news over the weekend, with the DAX falling back from its 100-point range seen last week to test the 10,600 area this morning. This is holding for now but, as I have noted before, there is mostly thin air below it until the 50-DMA at 10,070.

The trend on the daily RSI points to additional downside, reinforced by the move below the hourly trendline that did so well to support the index throughout January. Any selloff in the coming weeks sets up the index (and other European indices) for a rally as ECB QE gets underway in March.

On the hourly chart the 28/29 January lows around 10,590 could see some buyers step in, but a drop below here would head towards 10,300 as the next possible support area. Meanwhile, on the upside, the 200-hour at 17,790 and then the all-time high around 11,000 are the main targets.

Dow tumbles from Friday's highs

This index is still holding above the downward trendline that it broke last week, even if it is sharply off the highs of Friday’s session. This downward trendline currently coincides with the 50-DMA, so we could see support enter around the 17,670 area.

17,900 is first resistance on the upside, being the high from early January and where Friday’s gains began to falter. A daily close above here targets the December peak above 18,000.

A close below the downward trend from those December highs would reverse the bullish breakout of last week and put the emphasis back on 17,600 and then the 100-DMA at 17,400. In the background hover the 200-DMA and the rising trend off the October lows, currently around 17,200.

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