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Levels to watch: FTSE, DAX and S&P 500

Despite a good end to the week, indices are so far only tiptoeing higher this morning.

Data on screens
Source: Bloomberg

A strong finish on Friday and continually rising oil prices put indices at a vital crossroads. If major stock markets can avoid heavy losses today we may be looking at the beginning of a rally, as the pullback from the April high shakes out latecomers to the rally, while short positions increase.

As we will mention below, key support has held for the time being, which strengthens the bullish case, but the time has come for the buyers to do some heavy lifting. A failure today would signal that the weakness of late April/early May is set to continue.

FTSE 100

Friday saw the index test the waters below 6100 once more, but again buyers came in to defend this key support area. Although the day has begun with small losses, if the index can hold above 6110 and (ideally) move above 6150, then a rally may have begun. A failure to hold 6100 today would certainly indicate a new drop is on the way, with overbought intraday stochastics suggesting that upward progress may be difficult.

A short position with a stop around the overnight high of 6180 could be one way of taking advantage of weakness, with the knowledge that any push through 6180 would likely confirm the bullish thesis.

FTSE

DAX

If the index fails to push on to 10,000 today then the rally off the lows of Friday would seem to be a fresh selling opportunity.

A close below 9800 would certainly add to the bearish case, and bulls will need to see a close above 9900, and ideally above 9950, to indicate that more upside is on its way. A break below 9800 heads towards 9725 and then 9520.

DAX

S&P 500

Friday’s bounce failed to clear the high from last Thursday, and with the index now overbought intraday (plus weakness so far from Europe), it may be that we see another drop and a test of Friday’s lows below 2040.

The area around 2040 is vital support, from the second-half of April and from the first two weeks of May, so a drop here would raise the risk of more losses for the index, perhaps down towards 2010 or lower.

It would need a close above 2070 to reverse this outlook. 

S&P500

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