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

The ‘Santa rally’ should now be in effect, although markets may take some time to digest the implications of the Fed meeting last night.

Trader on the phone by window displaying DAX logo
Source: Bloomberg

FTSE 100 awaits the Santa rally

FTSE futures were relatively little-changed overnight, but with commodity prices weaker since the Federal Reserve decision, we might see a different picture emerge once trading begins in earnest. The ‘Santa rally’ is, historically, meant to begin today, so it will be interesting to see how seasonality plays out versus a potentially softer tone for indices.

So far the price has shown little desire to move below 6930, but a drop through here could test 6895 and then 6863 in the short-term. Upside targets lie around 6982 and then 7014. 

FTSE 100 price chart

DAX may benefit from stronger dollar

A stronger dollar has caused the euro to drop further, reversing the gains we saw earlier in the week, which suggests European indices may enjoy a better performance. On the upside, the area to watch is 11,320, with the December 2015 peak at 11,370 next in sight.

Support is possible around 11,140 and then 11,036. DAX dips have been furiously bought, so it will be interesting to see how weakness is treated given that a strong seasonal performance should also begin to be felt from this point onwards.

DAX price chart

S&P 500 looks set to lead by example

US indices should continue to set the tone of the week, but with the dollar rising again perhaps they will come under some short-term pressure (again, seasonality considerations apply here as the pre-Christmas rally should, historically, start from today). A bounce needs to clear 2273 and then 2280.

On the downside, a drop to 2244 and then 2231 could see support. A stronger dollar could cap gains, with consolidation being a more likely outcome in coming weeks than outright correction. 

S&P 500 price chart

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