Levels to watch: FTSE, DAX and Dow

Consolidation has been the name of the game this week, as markets prepare for the ECB meeting. However, with the meeting approaching, we could finally find direction once more.

Traders at the German Stock Exchange
Source: Bloomberg

FTSE choppiness continues
The FTSE has been relatively directionless this week as we lead into the European Central Bank meeting later today. The four-hour chart provides a bullish picture of price action which has been consolidating within an uptrend, with downside limited to the 6100 area (61.8% retracement).

The key to understanding whether any downside is indicative of a possible market top would be a closed candle below 6032. Until that happens, any short-term selling is likely to be bought into. The near-term level of 6100 will be crucial to the day’s sentiment, given a closed hourly candle below that would look like a head and shoulder break.

However, unless we see a break and closed candle below 6032, the uptrend remains intact, with 6220, 6270 and 6324 the next major resistance levels. 

DAX tracks SMA higher
The DAX failed to make much of the 9695 break earlier in the week, with price tracking the 50-period simple moving average (four-hour) ever since. The 9695 level is currently being tested once more and a break through both 9695 and 9680 (yesterday’s low) could provide us with another move back to 9615 level.

A break and close below 9615 would provide expectations of a stronger fall, with 9563 and 9410 the next support levels. Alternately, should we fail to see price break through 9680, another period of sideways consolidation could emerge, with 9844 and 9900 the next resistance levels. 

Dow moving towards bottom of range
The Dow Jones has been in a sideways range between 17,097 and 16,918 this week and this looks to be key once more today. Given the turn lower from the upper echelons of the range, a move towards the 16,937-16,918 zone seems likely.

Beyond this range, direction will be determined by a closed candle above 17,097 or below 16,918. Support levels below 16,918 are 16,818, 16,764 and 16,727. The next resistance above 17,097 is the November 2015 low of 17,140.

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