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Levels to watch: FTSE, DAX and Dow

Yesterday’s spike provides relief for embattled indices, but there are key levels which need to be taken out for the possibility of a more bullish outlook. 

Two women walking by charts on a display
Source: Bloomberg

FTSE fails to close below support and forms potential bullish head and shoulders formation

Yesterday’s bounce across the major indices saw the FTSE somehow turn early losses into gains and most notably that provided the index with a daily close above 6672. The selloff from resistance at 6743 later into the session pointed towards a clear resistance that needs to be cleared if we are going to see a resurgence in the FTSE.

The bounce this morning came from a higher base than yesterday’s low and this gives us scope for a possible inverse head and shoulders formation, which if completed would point towards a move back to 6861. For that to happen, we would need a move above 6743, which seems likely today given the strong UK open.

As such I am looking for a move to 6743 and will take it from there. A move above 6743 would point towards 6861, whereas further respect of that level would point towards a move back towards 6692.

FTSE chart

DAX rises from support zone yet trendline resistance is in sight

Yesterday saw a significant bounce higher in the DAX, following another move into the support zone as derived by the area between the 38.2% retracement and March descending trendline. This long upper shadow on yesterday’s highest candle is a bit of a warning sign as it looks very similar to the near-term swing high top on 11 June.

Nevertheless, so far today we have seen a strong start to proceedings and a move above 11,286 could point towards a move back to 11,446. However, much like the FTSE, I am weary that there is major resistance in sight (11,290 peak, descending trendline and 100-hour SMA), and thus there is a key hurdle that needs to be crossed for me to become bullish.

Germany 30 chart

Dow breaks through resistance and points towards further gains

The Dow Jones enjoyed a great day yesterday, spiking higher to move above the crucial 18,112 resistance level. This new high provides confidence of another leg higher rather than a break below 17,686 that has been habitually threatened this month. Should support hold at 18,112, it could be a good base for another move higher. However, I would be aware of the 18,170 peak that was used as the entry into the double-bottom formation we have seen, and thus I think 18,112 will be crucial to see whether another bounce will or won’t happen in the short term.

A move below 18,112 would point towards a retracement lower and likely higher low, possibly around 17,914. Whereas the ability to hold above 18,112 would point towards a break up towards 18,208. The double-bottom projection gives a target of 18,530, yet with the Greek issue likely to determine a significant amount of direction in the near term, the time it will take to get there is less certain.

Dow Jones chart

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