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Levels to watch: FTSE, DAX and Dow

The indices take a breather, with the Dow in particular bearing the brunt of pre-Christmas profit taking. Is this simply a short-term retracement or something indicative of a wider shift for the indices?

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Source: Bloomberg

FTSE pulling back within uptrend

The FTSE is gently retracing lower, following yesterday’s creation of a near two-month high. The ascent certainly seems to have slowed somewhat over recent days, yet the trend remains intact. As such, this pullback is viewed as a short-term retracement before we move higher once more.

Watch out for the 61.8% and 76.4% Fibonacci retracements as areas for potential new longs. As long as we do not see an hourly close below 6901, the bullish view remains in play.

FTSE 100 price chart

DAX weakness could prove fleeting

The DAX is similarly falling back this morning, coming into the 11,434 support zone (Friday/Monday resistance). The difficulty of this retracement is the closest swing low is found at 11,352, which is some way from current price.

A break and hourly close below 11,434 could point towards a strong pullback, towards the 11,401 region. It is worth noting that the 11,434 level is a major historical point of reference (November 2015 high) and the ability to maintain price above this level is bullish by nature.

To the upside we have trendline resistance to contend with. As such, the breakout from this current descending triangle will provide the directional bias in the short-term. However, we would need to break below 11,352 to be anything other than bullish for the overall picture. 

DAX price chart

Dow retraces following triangle breakout

The Dow Jones has sold off sharply from the 19,989 high of Tuesday, with the 20,000 mark looking increasingly unlikely to be hit before Christmas. With the index currently moving higher, the ability to push through 19,938 could provide the bulls with some hope for the short-term.

However, there is a threat of a potential move back into the 19,884 Fibonacci support. In either case, a wider bullish view remains in place unless we see an hourly close below 19,852.

Dow Jones price chart

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