Levels to watch: FTSE, DAX and Dow

Indices have moved swiftly lower this morning, as China’s plunge overnight leaves investors with little reason to be long equities. 

Traders looking at data
Source: Bloomberg

FTSE could fall to 6430

The downside scenario still has pre-eminence here, Friday’s sharp drop having put the bears firmly in charge. A continuation of this move, which looks highly likely given the bearish stochastics seen on the daily chart, would be a test of the July lows below 6500, possibly as far as 6430. For fans of moving averages, the 50-day SMA at 6771 is now almost certain to move below its 200-day counterpart (6760), and I would look on any moves towards 6600 during the day as another opportunity for fresh selling.

Dow Jones chart

DAX stochastics still bearish

The retreat goes on here – having failed to breach the October uptrend line (A) from below (15-21 July), the index now finds itself moving back below the downtrend line (B) from the April highs. A close below 11,250 would bring out the sellers, with an immediate target of the 200-day SMA at 10,841. With stochastics still bearish, intraday rallies are there to be sold. Only a close back above 11,400 would do anything to dispel the impression that we are headed lower here.

DAX chart

Dow near July low

US futures are already probing Friday’s low, and for the Dow Jones the month low of 17,465 is not that far away. If we fail to hold here then we risk a sharp move towards 17,200 and then the 2015 low around 17,000 itself.  As with the DAX and the FTSE, any move back towards the 50-hour SMA (17,726) would be another classic sell opportunity. 

Dow Jones chart

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.

Find articles by analysts