Levels to watch: FTSE, DAX and Dow

Indices are looking bullish over the short term, but questions remain.

A man looking at a chart
Source: Bloomberg

FTSE lifted by US data boost

Friday’s selloff was stopped in its tracks by a particularly strong reaction to the somewhat obscure US employment cost index. This provided a leg up for global indices and gave the FTSE a more bullish tone.

Following the inability to create a new high, we were watching for a new low, yet this didn’t happen and the subsequent data-driven high points towards a possible resumption of last week’s move higher.

The 50-hour SMA is clearly key here as it has provided support on two occasions now. The hammer candle posted at that moving average has led to gains, which point towards a break above 6710. However, the 6727 resistance is probably more important. I need to see a move above 6727 to gain confidence of a major move higher.

With the current rising wedge formation coming within an uptrend, I would still expect us to move lower from this pattern in the near future. However, the 6672 level and 50-hour SMA will be crucial to today’s price action. Thus while I am bullish in the short term as long as the price is above 6672, I do expect us to move lower towards 6649, 6639 and 6624 levels.

FTSE chart

DAX selling off again within ascending channel

DAX is looking a lot like moving back towards the bottom end of the channel that has been in place for around a week now. The stochastic is clearly stuck within the upper end of its range, yet it has turned downwards and I believe it is highly likely that we will see this sell off back towards the 11,250 area which is just above the upper end of the long-term descending trendline from mid-April. Thus for now, I am simply watching for the price to remain within the current ascending channel and will only take direction following the breakout of this formation.

DAX chart

Dow weakness means upside needed to avoid selloff

The Dow Jones has continued to create higher highs over the last week. However, with the price now within relatively close proximity to the 17,636 swing low, we will need to see it move higher today to avoid this chart looking progressively more bearish. The indicators are in place for such a move higher, including an increasing MACD histogram alongside an oversold stochastic, but we await the move. If we see a move above 17,705, that would be the short-term indicator that we could see a bounce higher back towards 17,800. However, this chart is clearly showing signs of slowing and possibly reversing lower. However, I would only become bearish should the price move below 17,636. 

Dow Jones chart

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