German industrial production was rather shocking, dropping sharply in August by 4% with production of new cars slumping 25% month-over-month. Bear in mind that German GDP shrank by 0.2% in the April-June quarter, so the spectre of a technical recession looms for the eurozone powerhouse.
The fact remains, as we enter corporate earnings season with a side order of the Federal Open Market Committee minutes tomorrow evening, there is bound to be a degree of risk-off in the markets. Whether this will be sustained is the real question.
FTSE capped by 200-H MA
On the weekly chart, price action is again attempting to challenge the 100-week moving average from above. It was tested last week, but closing above it, any close through here would likely see additional downside follow. We have not seen a weekly close through this level since November 2012, this was a short-lived dip. The decline in May of 2012, saw the FTSE 100 lose an additional 6% over the subsequent three weeks.
The failure to make any inroads through the 6600 level yesterday, with price action capped by the 200-hour MA, has sent the UK benchmark on a move back towards 6500 in early trade. Should support around the round number fail to provide, then we may be looking at a return to last week’s lows at 6420. This remains an important area as it coincides with the rising trendline support from the August 2011 lows.
DAX finds support at 8900
The weekly chart is beginning to sport what may transpire to be a head and shoulders top. The 8900 level remains key support over the medium-term, where the rising support from the September 2011 uptrend coincides.
DAX investors have certainly not taken the poorer-than-expected industrial production data well in early trade, sending the index back to levels seen in mid-August. The 9120 level is for now seeing bid action and has acted as a decent support level on several occasions. While above it, we may see a bounce back towards 9200. Any daily close below would target the August 8 lows at 8912.
The bearish channel on the hourly chart is still intact with the 100-hour MA, the true line in the sand. All attempts to move above this metric have been met with additional selloffs. A move through 9290 is required to reverse the current malaise and even with that, we will have the 200-H MA at 9400 creating its own barrier to upside.
Dow RSI not yet oversold
As pointed out yesterday, the Dow Jones really needed to get above the 17,100 level if any attack on the all-time highs was to materialise. So the fact that we tried and failed now sees the 50-DMA under pressure on the futures market. A close below 16,900 could well see the Dow fall towards 16,740.
The false breakout from the bearish channel on the H1 is in itself bearish. For now, the 100-H MA is providing a floor for the price, yet with the relative strength index not yet oversold more downside seems the likely scenario. Getting back above the 200-H MA at 17,000 would help negate the current short-term trend.