Levels to watch: FTSE, DAX and Dow

Major indices are in correction mode as we await the return of the bulls.

A chart
Source: Bloomberg

FTSE 100 begins to sell off following yesterday’s spike back to 7065

Yesterday saw a substantial bounce higher, with the move regaining much of the losses seen on Tuesday. As a result, the index was brought just shy of the crucial 7065 resistance level and is beginning to sell off yet again.

This short-term inability to clear 7065 means that an ascending triangle formation is in play. The resolution of it will be the cue for many to jump into the market. However, while the medium-term direction will be dictated by a break below the 7065 level or ascending trendline (currently 6960), I am happy to play the formation for short-term gains and thus I would expect buyers to come back in around 6975-6960. Until then, the reversal lower is likely to extend if we see a move below 7000.

DAX consolidation breakout leads to…consolidation

The DAX's break lower on Tuesday saw support hold up around 11,618 as hoped for. However, subsequent upside has been capped at the previous support level of 11,800.

This morning is seeing a little bounce higher which may mean another challenge of 11,800, yet ultimately it will only begin to look like it is continuing the bullish primary trend with a break above 11,800 and 11,927.

Any move lower would likely meet support around 11,618 and 11,350 (descending trendline). However, my outlook is bullish overall and I do expect us to see that strength come back to the fore in the near future.

Dow looks set to resume correction lower

The new highs set by the Dow Jones last week lasted all of a day as we have seen selling dominate this week’s proceedings.

Yesterday’s selloff from near the crucial 18,208 resistance level provides a greater likeliness of another move lower today which appears to be in progress. With that in mind, I expect to see the index move towards 18,019 (50-day SMA) before the end of the week is out. Following this, I could see a move down towards 17,912 levels (100-day SMA and ascending trendline starting in October 2014). A move above 18,208 would negate this bearish view.

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